The American economy grew by 4.0 per cent in the three months leading to December 2020, say the Bureau of Economic Analysis in a quarterly report published earlier today.
The recorded performance managed to follow up on the positive trend that was set the last time per the massive 33.4 per cent seesaw jump in Q3; however, it came short of the 4.2 per cent that was projected by the initial market expectations.
The Gross Domestic Product numbers come just a day after the January FED meeting, as the FOMC continues to evaluate the changing impact of the coronavirus fallout on the tentative economic recovery.
While prices rose in December, the U.S. labour market lost over 140 thousand jobs for the same period, which stymied growth. Unsurprisingly, this trend was exacerbated by the uptick in confirmed COVID-19 cases towards the end of 2020.
The weaker-than-expected performance by 0.2 per cent thus resulted in a sizable market reaction because this was advance GDP data, meaning that it represents a preliminary reading of underlying growth over the period in question.
The greenback had an initial adverse reaction to the news caused by a sudden surge in demand for low-risk securities. Gold jumped by more than 1 per cent in the first 30 minutes following the economic report's release.
As can be seen on the hourly chart below, gold broke out above the descending wedge pattern in the wake of the advance GDP numbers' publication. Our last analysis of the commodity projected such a potential turn of events.
The price action rebounded from the psychologically significant support level at 1836.28, whose significance as a turning point stems from the fact that it serves the role of the 38.2 per cent Fibonacci retracement.
While there is a sizable upsurge in bullish momentum, as demonstrated by the MACD indicator, this bullish pullback is yet to be tested. As shown, the price action has to eventually break out above the major resistance at 1856.50, which could also serve as a turning point.