Staten Island Ferry and Statue of Liberty (New York). Image source: VillageHero, flickr.com
The dollar rally resumes with full strength following the release of the better-than-expected growth rate numbers in the U.S. You can read more about the underlying causes of the rally from our detailed EURUSD analysis from earlier today.
The Bureau of Economic Analysis in the U.S. just revealed that the U.S. economy expanded at a faster pace in the fourth quarter than it was initially expected by the preliminary forecasts. These welcoming results strengthened the greenback's rally in the short term.
GBPUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the greenback continues to advance against the pound in what looks like a 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory.
Today's advance GDP growth numbers added to the selling pressure that was catalysed following FED's January meeting from yesterday, as the price action broke down below the lower limit of the descending channel and the 61.8 per cent Fibonacci retracement level at 1.33867.
The new downtrend is now likely to head towards the previous swing low at 1.32000. Intermittent pullbacks to the 61.8 per cent Fibonacci from below area are also possible, potentially allowing bears to use trend-continuation trading strategies.
The Better-Than-Expected GDP Growth Numbers for Q4
U.S. QoQ Advance GDP Growth Rate. Image source: TradingEconomics.com
According to the findings of the economic report, the U.S. economy grew by 6.9 per cent in the three months leading to December 2021, beating the preliminary forecasts projecting a much smaller expansion by 5.3 per cent. This performance marks a significant rebound in economic activity from the previous quarter when the rate of expansion was recorded at 2.3 per cent.
There seems to be a global pick-up in economic activity as China also posted better-than-expected GDP numbers for the same period. Meanwhile, industrial activity in Germany, the biggest economy in the Eurozone jumped considerably in December. All of these factors point to the likely accelerating pace of global recovery.
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