£/$

The likely absence of an upgrade to first-quarter GDP growth numbers when the second estimate is published today (22 May) could mislead traders into thinking the UK economic outlook is stable. But we expect growth to disappoint and suggest going short sterling against the dollar.Now could be a prime time for taking a negative stance given the pound’s year-long bull run against the greenback. The sluggish performance of US equities - which track the GBP/USD very closely - could be a precursor to a significant pull-back, making now a good juncture to sell.

Market consensus expects today’s second estimate of first-quarter GDP to come in at 0.8%, unchanged from the first estimate published last month (29 Apr), and equivalent to a 3.1% annual rate of expansion. But the outlook for the UK economy remains uncertain and comments from Mark Carney following last week’s Inflation Report (14 May) confirmed as much when the Bank of England governor warned rates would remain low for ‘some time’.Key levels: As mentioned above, US equity weakness is a red flag to those still holding bullish sterling trades. This has been confirmed by a sharp decline in the GBP/USD pair’s RSI, which is now trading at 47.868, suggesting a period of contraction ahead and I would suggest a target of 1.6409 (161.8% Fibonacci level). Stops should be positioned at 1.6857, being the 38.2% Fibonacci level and where the pair could experience resistance in the event of a bounce.