GBP/USD - Descending broadening wedge breakout, eyes UK GDP: Consumer spending component

GBP/USD closed above 1.30 for the first time since May 19 after Carney’s hawkish twist on Wednesday yielded a bullish descending broadening wedge breakout. The currency pair traded above 1.30 levels in the Asian session today. 

Has the larger uptrend resumed?

Descending broadening wedge breakout is a continuation pattern… which means as per the textbook rules the rally from the low of 1.2109 (March 14 low) has resumed. The technical picture thus looks bullish and gels pretty well with the BoE's hawkish twist. 

The US-UK 10-year yield spread has also narrowed from 120 basis points in mid May to 101 basis points as of today. 

Focus on UK GDP - Consumer Spending 

UK first quarter GDP reading is due for release today at 08:30 GMT. More than the headline figure, the markets would be interested to see if consumer spending is holding up well against the rising inflation. 

An upward revision of the consumer spending would mean the economy could withstand a rate hike. Thus, GBP/USD might attack 1.31 handle on strong consumer spending number. On the other hand, a weak consumer spending figure would mean the BoE may not walk the ‘hawkish talk’. That could yield a pull back in the GBP/USD pair. 

Later the day, the spot may also take cues from the US personal spending number, and the resulting action in the treasury yields. 

GBP/USD Technical Levels

A break above 1.3048 (previous month’s high) would expose 1.31 (zero levels) and 1.3169 (0.618 Fib expansion of Mar 2017 low - May 2017 high - June 2017 low). On the other hand, a break below 1.2977 (June 8 high) would open up downside towards 1.2895 (5-DMA) and 1.2867 (50-DMA).