Euro and pound returned to local highs ahead of potential further gains as the first estimate of US GDP for Q4 last year is coming. Forecasts say it will show a slow down from 1.9% to 1.6%, which is not very positive. However, if this is accompanied with talks of recession in the US, a much slower rate of economic growth should be expected.
The GDP figures alone are enough to cause further decline in dollar, especially since weekly jobless claims are expected to rise by 16,000 in the US. In particular, initial claims may rise by 12,000, while repeated ones may increase by another 4,000. If these come true, both euro and pound will easily hit new local highs.
GDP (United States):
EUR/USD is moving upwards, but has not yet reached a new local high. This means that there is a chance for another 50-60 pip price increase, provided that the pair holds above 1.0930 in the four-hour (H4) timeframe. Such a scenario could bring the pair to 1.1000.
In GBP/USD, a rebound from 1.2300 brought the pair back to the local high. To prolong the cycle, buyers need to keep the quote above 1.2440 in the H4 TF, otherwise, a bounce back to 1.2300 could take place.