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UK Trade balance preview: What to expect in GBP/USD?

FXStreet (Mumbai) - The GBP/USD pair trades around the session high of 1.5383 in early Europe; up for the fourth consecutive session after Fed minutes revealed policymakers are in no hurry to raise rates.

UK trade deficit expected to drop in August

The UK total trade deficit in August is seen dropping to contracting to GBP 10.00 billion from July’s GBP 11.082 billion. Given the anaemic demand in the global economy, a drop in the exports is no longer a surprise. So even a minor uptick in the exports would be a welcome development.

Meanwhile, drop in imports could be read as negative sign, since it would mean domestic demand is not responding positively to uptick in the wages and tightening labor market conditions. Still, a higher-than-expected trade deficit cannot be ruled out as PMIs in July and August showed a drop in new work partly due to a slowdown in export orders.

GBP/USD Technical Levels

Above 1.5380 (weekly 50-MA), the pair could easily rise above 1.53 and take out 50-DMA resistance at 1.5421 in case the drop in the UK trade deficit is larger than expected. A break above 1.5421 would open doors for 1.5485 (100-DMA). On the lower side, immediate support is seen at 200-DMA located at 1.5318. A spike in the UK trade deficit could push the pair below 200-DMA and expose support at 1.5248 (50% of Apr-June rally).

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