UK, London. Image source: Metro Centric, flickr.com
The latest growth data in the UK revealed a worrisome indication of a possible disruption to global recovery, just days after BOE's massively optimistic policy meeting. To learn more about the current investors' sentiment, check out our latest Nasdaq analysis.
Earlier today, the Office for National Statistics revealed that the UK GDP growth rate increased by 1.1 per cent in the third quarter, below the 1.3 per cent projected by the initial forecasts. These weaker-than-expected numbers come just days after BOE's somewhat surprising decision to increase the interest rate, leading investors to wonder whether the decision wasn't premature.
EURGBP 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
The pound surprisingly jumped on the news, as shown on the 4H chart above. The EURGBP appears to be in the process of developing a bearish 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory, following the completion of a major bullish cycle.
The second retracement leg (3-4) rebounded from the 61.8 per cent Fibonacci retracement level at 0.84646 and peaked just below the 23.6 per cent Fibonacci at 0.85488.
If the price action manages to close down below the major support levels at 0.84950 and 0.84850, underpinned by the 200-day MA (in orange) and 300-day MA (in purple), respectively, it would then be able to head towards the previous swing low at 0.84200. This would represent the third impulse leg (4-5).
Conversely, a potential rebound from either of the two thresholds would likely be followed by a pullback to the 38.2 per cent Fibonacci at 0.85166.
UK's latest growth data missed the market forecasts
UK QoQ GDP Growth Rate. Image source: TradingEconomics.com
By virtue of being the final GDP report for the third quarter, the impact of this surprising misstep is likely to be considerable. Investors' fear is additionally likely to be compounded by the rampant spread of the Omicron variant in the country, which stymies activity even further.
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