The markets opened on Monday with a pinch of worry about the US-Sino relationships and the prospects of global growth. US President Donald Trump stated on Friday that a complete roll back of tariffs was not agreed as such yet implied that a partial deal is still be in the cards. Hence, we maintain the optimism about a partial deal being near, yet at the same time uncertainty about the timing and its actual content seems to persist in the markets. The market’s reaction once again shows its sensitivity to the issue, having a wider spread in the FX, oil and stock markets. On the other hand, it should be noted that China’s data on Saturday where somewhat disappointing as inflation reached an 8 year high of +3.8% yoy, while at the same time producer prices dropped by -1.6% yoy, the widest drop since mid-2016. We expect that depending on the headlines, we could see USD strengthening against the JPY should there be positive news. USD/JPY lost some of its strength on Monday’s Asian session as it tested the 109.00 (S1) support line. A bearish trendline seems to be forming since Friday, hence we maintain a bearish outlook for the pair, yet we would require more solid data to confirm the direction. Should the bears maintain control over the pair’s direction, we could see it breaking the 109.00 (S1) support line and aim for the 108.35 (S2) support level. Should the bulls take over, we could see the pair aiming if not breaking the 109.70 (R1) resistance line.
… while the pound prepares for the release of UK’s growth rates…
The pound maintains its bearish tendencies as the uncertainty of the UK political scene seems to continue to weigh. However, it should be noted that latest polls show the UK Conservative government widening its lead, and analysts tend to note that should this trend continue we could see the GBP edging higher. It would be indicative that Conservatives warn about the economy, under Labor government, turning the focus of the elections away from Brexit. As for financial releases the pound seems to be preparing for a heavy week, which starts today with a slew of data, among them the preliminary GDP growth rate which is expected to accelerate substantially. We could see the pound being somewhat more sensitive to data releases in the next few days getting some support if the releases favor it. Cable continued its drop yet bounced on the 1.2760 (S1) support line on Friday. For our bearish outlook to change for the pair, we would require a clear breaking of the downward trendline incepted since the 1st of the month. Should cable remain under the selling interest of the market, we could see it breaking the 1.2760 (S1) support line and aim for the 1.2640 (S2) support level. On the other hand, should the pair’s long positions be favored by the market, we could see the pair, breaking the 1.2885 (R1) resistance line, the prementioned downward trendline and aim for higher grounds.
Other economic highlights today and early tomorrow
Today’s market attention could turn to UK’s preliminary GDP rate for Q3, UK’s Manufacturing output for September and finally UK’s Trade balance for September all due out at the same time. Other than that, its expected to be a rather quiet day, with the US markets on holiday.
As for the week ahead
On Tuesday, we get UK’s Employment data for September and Germany’s ZEW economic sentiment for November. On Wednesday, we get RBNZ’s interest rate decision, UK’s inflation rates and in the US Fed Chair Jerome Powell speaks. On Thursday, from Japan we get the preliminary GDP rate for Q3, Australia’s employment data for October, China’s industrial production for October, Germany’s and the Eurozone’s preliminary GDP for Q3, UK’s retail sales for October and from the US the PPI rate for October. On Friday, the US retail sales for October and the US industrial production for October are due out.
USD/JPY 4 Hour
Support: 109.00 (S1), 108.35 (S2), 107.75 (S3)
Resistance: 109.70 (R1), 110.50 (R2), 111.30 (R3)
GBP/USD 4 Hour
Support: 1.2760 (S1), 1.2640 (S2), 1.2510 (S3)
Resistance: 1.2885 (R1), 1.3015 (R2), 1.3170 (R3)
