Today's disappointing growth numbers in the U.S. are likely to exacerbate the short term woes for the greenback. Even still, the prevailing market sentiment on the GBPUSD remains tilted to the downside.
The U.S. economy grew 6.5 per cent in the three months leading up to June, missing the consensus forecasts of 8.5 per cent. The dollar sinks momentarily in the short term after it was revealed that the pace of recovery is stagnating.
The news comes hours after the July meeting of the FED, which did not deliver anything new to the table regarding FOMC's current policy stance. Part of the reason the GDP numbers missed the consensus forecasts has to do with the persisting supply bottlenecks worldwide.
As can be seen on the hourly chart above, the EURUSD has been on the advance since yesterday's FED meeting. The latest upswing is currently taking the form of a 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory.
Given that the last impulse leg (4-5) appears to be peaking near the upper boundary of the ascending channel, which, in turn, is converging with the 61.8 per cent Fibonacci retracement level at 1.18892, another reversal seems highly probable in the near future.
This is further substantiated by the fact that the underlying bullish momentum is currently waning, as underpinned by the MACD indicator.
A potential correction is likely to fall to the closest support level of psychological significance - the 38.2 per cent Fibonacci retracement level at 1.18361.
Even though the advance GDP numbers fell way below the consensus forecasts, the U.S. economy still managed to grow marginally (by 0.2 per cent) from the first quarter of 2021.
The economic expansion was made possible by the ongoing vaccination process, the significance of which was alluded to in FED's monetary policy statement from yesterday.
As more and more people get inoculated, personal expenditure continues to grow. That is so because more and more people are allowed to travel, bolstering consumption.