GBP/USD rallies above H1 100-SMA; US GDP down to 1.9%

Currently, GBP/USD is trading at 1.2574, down -0.13% or (16)-pips on the day, having posted a daily high at 1.2605 and low at 1.2517.

An empty UK economic docket offered no aid to the Great British Pound vs. American Dollar during the Asian and European trading sessions. However, the currency pair was about to turn around and had the opportunity to erase 59-pips in previous losses as the US GDP figures were 'a worse than expected' at 1.9% or 0.3% lower than expected and -1.6% lower from the previous 3.5% figure. 

Historical data available for traders and investors indicates that in January, GBP/USD pair had the best trading day at +3.01% (Jan.17) or 373-pips, and the worst at -1.19% (Jan.18) or 146-pips.

Consumers saved UK's GDP quarterly figure

Reuters reports, "Britain's free-spending consumers again wrong-footed broad prognostications of a slowdown after June's Brexit vote, driving a robust pace of economic growth in the final three months of 2016, data showed on Thursday."

"Gross domestic product rose at a quarterly rate of 0.6 percent between October and December, keeping the above-average pace seen in the first three months after June's referendum decision to leave the European Union. Services, most susceptible to consumers, were the biggest gainers, while industry and construction lagged. Economists polled by Reuters had forecast a slight slowdown to growth of 0.5 percent. Some predictions ranged as low as 0.3 percent," the report concluded.

Brexit undermines domestic demand
Bloomberg reports, "Growth that's consistently faster than expected, accelerating inflation, record employment and soaring consumer borrowing suggest the economy is running hot enough to weather higher borrowing costs. Traders have taken notice, responding to the latest signs of economic strength by raising bets on a Bank of England interest-rate hike by the end of the year."

The report continues, "But then there's Brexit, and that means the BOE doesn't expect the good times to last. The pound's drop since the vote to leave the EU is driving up prices and could knock back consumer spending. Compounding that drag, the central bank also expects investment to weaken, further undermining the domestic demand that's keeping the show on the road."

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 1.2596 (50-SMA), then at 1.2640 (horizontal resistance) and above that at 1.2672 (high Jan.26). While supports are aligned at 1.2515 (today's low), later at 1.2460 (horizontal support) and below that at 1.2436 (200-SMA). On the other hand, Stochastic Oscillator (5,3,3) seems to head north in the middle of an oversold recovering condition, therefore, there is evidence to expect further sterling gains in the near term. 

On the long term view, if 1.1985 (low Jan.16) is in fact, a short-term bottom, the upside runs all the way towards 1.3239 (short-term 23.6% Fib). However, without removing the 'hard' dark cloud from all Brexit negotiations, the sterling faces a gargantuan resistance level against 1.4001 (short-term 38.2% Fib) and 1.4167 (long-term 23.6% Fib).

GBP/USD Forecast: May-Trump meeting and US data up next