GBPUSD seems to be tired from its dive, as the pair formed a reversal pattern on its longer-term charts. Price failed in its last two attempts to break below the 1.1975 area, creating a double bottom formation with the neckline at 1.2750. A break past that level could take price up by around 800 pips.
However, the 100 SMA is below the longer-term 200 SMA on the daily chart so the path of least resistance is to the downside. Also, the 100 SMA seems to be holding as dynamic resistance for now. If it continues to keep gains in check, another move towards the 1.1975-1.2000 handle could be in the cards.
Stochastic is also indicating overbought conditions so buyers might need to take a break or book profits and let sellers take over. A bit of bearish divergence can also be seen as price made lower highs while stochastic had higher highs.
UK preliminary GDP came in better than expected for Q4 2016, as the economy expanded by 0.6% versus the projected 0.5% growth figure. To top it off, the earlier reading was upgraded to show 0.6% growth. BBA mortgage approvals also ticked higher, indicating a robust housing market even with Brexit risks.
As for the US, data came in mixed with new home sales falling short of expectations and initial jobless claims signaling a higher rise in unemployment. Still, the flash manufacturing PMI beat expectations by rising from 53.9 to 55.1.
Up ahead, the US will print its advanced GDP reading and might show slower growth of 2.1% for Q4. A weaker than expected result could mean more losses for the dollar, which is already being weighed down by rising risk appetite.