GBP/USD forms a cup and handle as UK house price index rises

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on Jun 7, 2021
  • The GBP/USD pair declined slightly as the US dollar bounced back.
  • The pair dropped even after strong UK house price index data.
  • Data by Halifax and Nationwide showed that house prices jumped in May.

The GBP/USD price retreated on Monday even after the relatively strong UK house price index data. The pair dropped to 1.4137, which was relatively lower than last Friday’s high of 1.4200.

GBP/USD
GBP/USD price action

UK house price rises

The UK housing sector is doing well, according to the recent data by Halifax and Nationwide Housing Society. Last week, data by Nationwide showed that the UK house prices rose by 1.8% in May compared to April. Precisely, the average UK home price rose to 243,000 pounds in May. This was 24.000 pounds above the same time in 2020.

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On Monday, data by Halifax, the company owned by Lloyds Bank, showed that the average house price rose to 261,743 pounds in May. That was a 1.3% monthly increase and a 9.5% annual increase. 

This trend is mostly because of the extended stamp duty holiday, low-interest rates, and the fact that many people have accumulated substantial savings because of the lockdowns. An analyst at Halifax said:

“For some homebuyers, lockdown restrictions have also resulted in an unexpected build-up of savings, which can now be deployed to fund bigger deposits for bigger properties, potentially pushing property prices even higher.”

The GBP/USD also declined as the US dollar bounced back after the sharp decline it made on Friday last week. The drop happened after the relatively mixed non-farm payroll data from the United States. The data showed that the economy added more than 500k jobs in May while the unemployment rate dropped to 5.8%. The job additions were relatively lower than what analysts were expecting.

This week, the GBP/USD will react to the upcoming US consumer inflation numbers that will come out on Thursday and UK GDP data that will be released on Friday.

GBP/USD technical analysis

GBP/USD
GBP/USD technical chart

The daily chart shows that the GBP/USD pair is hovering near the highest level this year. It has formed a narrow ascending channel that is shown in black. It is also slightly above the 25-day and 50-day exponential moving averages (EMA). It is also forming the handle section of the cup and handle pattern. 

Therefore, in the near term, the pair will likely rise since the C&H pattern is usually a sign of bullish consolidation. However, a drop below1.4075 will invalidate this trend.

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