UK preliminary Q4 GDP came in above expectations in holding at 0.6% q/q growth, and 2.2% y/y, unchanged from Q3. The median forecast had been for a slightly dip to 0.5% q/q and 2.1% y/y. The ONS confirmed that “strong consumer spending supported the expansion of the dominant service sector” while manufacturing “bounced back from a weaker third quarter,” aided by the drop in the pound. The outlook for 2017 looks to be a little less sanguine with inflation pressures set to erode real household incomes as businesses pass on rising input costs.
Sterling has enjoyed a strong run over the last few days and on Tuesday (January 24) I wrote “GBPJPY, the longtime preferred pair of the large FX hedge funds, appeared to make a bottom last week which it has recovered from in traditional style. The Guppy or Widowmaker spiked down to 136.45 last Monday (January 16) before reversing aggressively following the UK PMs Theresa Mays 12 point plan for Brexit speech. The three day (3 Soldier) move up punctured the 200 DMA on Thursday (January 19) and has remained north of this key level since then. A long position was taken at 141.15 with target 1, little beyond the 14 DATR and t the 61.8 Fibonacci level at 143.80 as this trade is with the longer term trend. Target 2 is close to the outer Bollinger band and at the psychological 146.00. 142.00 remains a key resistance level as it is also the confluence of the 20 & 50 DMA and the 50.0 Fibonacci level. RSI and MACD are neutral, however, the Parabolic SAR reversed on January 17”.
Earlier today Target 1 (143.80) was achieved for a net gain of 265 pips.
https://analysis.hotforex.com/ has had a 100% start to 2017 with five trades achieving both Targets 1 and 2 and a three trades hitting target 1 for a total net gain of 1632 pips.
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