Final US GDP rate for Q3 under the spotlight

The USD tended to edge higher against its counterparts yesterday yet the overall sideways motion seems to remain intact for now. It should be noted that the better-than-expected reading of the US consumer confidence for December may have provided some support for the USD. Yet the characteristic move of yesterday may have been the uniformly drop of US stock market indexes. The drop seems to have been instigated by market worries for a possible recession in the US economy and snapped the winning streak of US stock market indexes. Hence we expect market attention to fall on the final US GDP rate for Q3 later today and should the rate accelerate if compared to the 2nd estimate, it would imply that the growth in the US economy was wider than initially estimated and could ease market worries somewhat, providing support for US stockmarkets and the USD, as it would allow also the Fed to maintain a more hawkish approach for longer. 

On a technical level we note that S&P 500 dropped yesterday, after hitting a ceiling at the 4780 (R1) resistance line, just short of the all-time high at 4820. Despite the drop we tend to maintain a bullish outlook for the index as the upward trendline guiding it, is being tested yet for the time being seems to remain intact. Furthermore the RSI indicator despite correcting lower, remains still near the reading of 70, implying a strong bullish sentiment in the market for the index. Should the bulls actually maintain control over the index we may see it breaching the 4780 (R1) resistance line and aim for the 4850 (R2) resistance nest. On the flip side should the bears take over, we may see S&P 500 breaking the prementioned upward trendline, signalling the interruption of the upward movement, break the 4690 (S1) support line and take aim of the 4610 (S2) base.      

On the monetary front we note the release from Turkey of CBT’s interest rate decision. It should be noted that the acceleration of Turkey’s CPI rates tends to add more pressure on CBT to hike rates further and the market expects a 250 basis points rate hike by the bank later today. Should the bank for any given reason fail to provide the expected rate hike we expect the Turkish Lira to tumble as the bank’s reputation is on the line. On the flip side, a wider rate hike than expected may highlight the bank’s decisiveness in curbing inflationary pressures and enhance its autonomy from the Turkish Government, thus providing support to the TRY.

Other highlights for the day:

Today in the European session we get UK’s CBI distributive trades for December. In the American session, we highlight the release of the final US GDP rate for Q3 and note the US weekly initial jobless claims figure, and the Philly Fed business index for December and Canada’s retail sales for October. On the monetary front, we note the release of the Czech Republic’s CNB interest rate decision and that ECB’s Chief economist Lane speaks. During tomorrow’s Asian session, we note the release of Japan’s CPI rates for November and a possible acceleration of the rates could support the JPY as it would encourage BoJ to start normalising its ultra-loose monetary policy earlier. Meanwhile, BoJ is to release the minutes of the October meeting later today. 

USD/JPY dropped testing the 143.00 (S1) support line during today’s Asian session. On the one hand, the pair’s price action has started to form a downward trendline over the past 48 hours, which implies a bearish outlook yet on the other hand, the S1 seems to be holding. For the bearish outlook to be maintained we would require the pair to break the 143.00 (S1) support line and aim for the 141.50 (S2) support level. Should buyers be in charge of the pair’s direction we may see USD/JPY breaking the prementioned downward trendline in a first signal that the downward motion has been interrupted, yet the pair may advance to break also the 144.45 (R1) resistance line and start aiming for the 146.30 (R2) resistance level.

S&P 500 Daily Chart

Support: 4690 (S1), 4610 (S2), 4530 (S3)

Resistance: 4780 (R1), 4850 (R2), 4920 (R3)

USD/JPY H4 Chart

Support: 143.00 (S1), 141.50 (S2), 139.75 (S3)

Resistance: 144.45 (R1), 146.30 (R2), 148.30 (R3)

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