The GBPUSD pair rose slightly after the ONS released weak GDP data for the first quarter. The pair moved slightly above the neckline of the head and shoulders pattern that has been forming this week.
GBP/USD reacts to weak GDP data
Expectations of these numbers was low considering that the UK has been among the worst-affected countries by the coronavirus pandemic. In March, the economy contracted by a record 5.8% as most people stayed at home. This helped push the Q1 GDP down by 2.0% in the first quarter. On an annualised basis, the economy contracted by 1.6 per cent.
All sectors of the UK economy contributed to this slowdown. For example, manufacturing production declined by 4.6% in March while the industrial production fell by 4.2% in the month. Another data showed that construction production declined by 5.9% in the month while business investments declined by an annualised rate of 0.7%.
The GBP/USD pair knows that these numbers pale in comparison to what will happen in the second quarter. That is because the economy has been in lockdown for the most part of the quarter.
On the daily chart, the GBPUSD pair rose slightly because the numbers were slightly better than what analysts were expecting. As it rose, it ended the three black crows candlestick pattern that was emerging. Also, the price is still slightly above the 38.2% Fibonacci retracement level at 1.2215.
Therefore, if the pair ends below the current level, it will mean that the three black crows has formed, which means that the pair will continue falling. This is possible since the pair has already formed a double top pattern at 1.2645.