Daily Key points: US final GDP rates for Q2 anticipated

Today we highlight the release of US final GDP rate for the second quarter and the market will be looking closely for any setbacks in regards to the growth trend of the US economy. According to forecasts the final GDP rate for Q2 is expected to remain steady at -0.6%. Given the estimate, should the rate remain in the negatives for a second consecutive quarter as the preliminary rates showed, that would signal that the US is already in a recession, thus it could weaken the USD. On another note, Fed policy makers continue to reiterate their hawkish rhetoric towards taming inflationary pressures. Yesterday, Atlanta Fed President Bostic stated that he sees another 75-basis points raise for November’s meeting. We also note the scheduled speeches by Cleveland Fed President Mester and San Francisco Fed President Daly later today with markets looking for any deviation in the narrative. Moreover, the Weekly Initial Jobless claims figure is also expected today, which is set to increase to 215k compared to last week’s 213k figure and could weigh down on the dollar. Nonetheless, overall, the figure remains stable, indicating relative tightness in the US labour market.

Loonie traders await Canada’s GDP rate

CAD has been under significant pressure recently as the dollar continues to strengthen amidst a period of high uncertainty, elevated inflationary pressures and prospects of recession. The month-on-month GDP rate for July is expected to contract to -0.1% compared to the 0.1% of the previous month, signaling potential recession worries for the Canadian economy. Should the GDP rate for July slowdown to stagnation levels or even decline into the negatives, showing a contraction of the Canadian economy we may see the Loonie fall.

Germany’s HICP rate give update to inflationary problems

The EUR strengthened yesterday against its major counterparties and the market braces for the inflation print out of the Germany. Euro traders will be looking closely at the year-on-year preliminary HICP rates for September and according to forecasted data, rate is expected to rise to 10% compared to the 8.8% of the previous month. Should the actual rate meet the forecast, we may see Euro strengthening, as it could indicate that inflationary pressures remain elevated with no signs of easing, thus it could force the ECB to opt for a bigger rate hike.

GBP/USD choppy price action continues after a volatile session and is currently found near the 1.0815 (R1) resistance level. We maintain a sideways bias, given the return of the price action between 1.0815(R1) and 1.0630 (S1) levels and the RSI indicator points to a reading of 46 showcasing slight indecision. Should the bears regain control over cable we may see it breaking the 1.0630 (S1) support line and aim for the 1.0525 (S2) support level. On the flip side should the bulls take over, we may see the pair breaking the 1.0815 (R1) resistance line and then challenge the 1.0927 (R2) level.

Yesterday, USDIndex fell sharply from its highs but quickly regained its footing today. We maintain our bullish bias for the dollar given the ascending trendline initiated on the 20^th of September. The RSI indicator point to a reading of 53 after its rebound, possibly signaling slight indecision. Should the pair encounter buying orders we may see it breaking 113.70 (R1) line and aim for the 114.70 (R2) resistance barrier. Should a selling interest overwhelm, we may see the definitive break below of the ascending trendline, the 112.50 (S1) line and move close to the 111.50 (S2) support level.

Other highlights for the day:

Today we note the from the Czech Republic the CNB’s repo rate decision, and scheduled speeches by ECB Vice president de Guindos, ECB board member McCaul and ECB’s Chief economist Lane. We also highlight China’s NBS and Caixin manufacturing PMI figures both for September and Japan’s Industrial Output growth rate for August, both released during tomorrow’s Asian session.

GBP/USD H4 Chart

Support: 1.0630 (S1), 1.0525 (S2), 1.0395 (S3)

Resistance: 1.0815 (R1), 1.0927 (R2), 1.1065 (R3)

USDIndex H4 Chart

Support: 112.50 (S1), 111.50 (S2), 110.46 (S3)

Resistance: 113.70 (R1), 114.70 (R2), 115.70 (R3)

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