Today's advance GDP numbers in the UK contributed to the recent gains of the GBPUSD in the short term, following yesterday's inflation data in the U.S. Even so, the underlying sentiment remains ostensibly bearish, which is covered by our last comprehensive analysis of the cable.
The British economic growth accelerated by 4.8 per cent in the three months leading to June, according to the advance GDP numbers that were posted by the Office for National Statistics earlier today. The recorded performance is inlined with the preliminary forecasts.
The positive GDP numbers bolstered the recouping pound, as can be seen on the hourly chart above. In the short term, the change in demand pressures prompted the emergence of a minor bullish pullback within the broader downtrend.
The price action has been behaving as per the expectations of the Elliott Wave Theory. In particular, the underlying downtrend appears to be taking the form of a massive 1-5 impulse wave pattern, while the current pullback seems to serve the role of a retracement leg within it.
The pullback, which was catalysed by the U.S. inflation data from yesterday, emerged following the completion of the broader 2-3 impulse leg. The latter was structured as a minor 1-5 impulse wave pattern itself.
It follows that the pullback is actually representing the next 3-4 retracement leg. In turn, the pullback is likely to take the form of a corrective ABC pattern, similarly to the structure of the first retracement leg (1-2).
The price action is currently consolidating between the 100-day MA (in blue) and the lower boundary of the descending channel. A false breakout to the 23.6 per cent Fibonacci retracement level at 1.38864 may ensue next.
The latter represents a significant resistance level, especially given that it is currently converging with the 150-day MA (in orange) and the 200-day MA (in purple).
Upon the eventual completion of the 3-4 retracement leg, the price action would then likely resume developing the final impulse leg (4-5) below the 38.2 per cent Fibonacci retracement level at 1.38259.
The 4.8 per cent economic expansion in Q2 followed a 1.6 per cent contraction in the three months leading to March, underpinning the stable recovery in the UK.
These numbers substantiate the recently adopted hawkishness of the Bank of England.