Keeping an eye out for the US data

The USD got renewed support against its counterparts yesterday, while US stock markets and gold ended another day in the reds. The main reason behind the strengthening of the USD yesterday may have been the speech of Fed Chairman Powell, as he highlighted that the bank is in no hurry to cut rates. The Fed’s cautiousness towards cutting rates is understandable given that October inflation data showed a persistence of inflationary pressures in the US economy, while on a fiscal level, the Trump economic policies and intentions of imposing trade tariffs, tightening immigration and deepening the deficit hence also raising national debt possibly, may rejuvenate inflationary pressures in the US economy. It should be noted that the market’s expectations for the bank to cut rates eased since yesterday, hence we may see the USD being supported on a monetary level. Today we highlight the release of the US retail sales growth rate for October and the rate is expected to slow down implying an easing of the demand side of the US economy, while the industrial output growth rate also for the past month is expected to remain unchanged in the negatives, implying another contraction of economic activity in the supply side of the US economy. Hence the forecasts for both releases tend to place attention on the bearish side for the USD.

USD/JPY continued to rise yesterday placing some distance between it’s price action and the 154.65 (S1) support line. We maintain our bullish outlook as long as the upward trendline incepted since the 30^th of September remain intact and given that the RSI indicator is till near the reading of 70, implying a strong bullish sentiment of market participants for the pair. As a small word of caution, we would also like to add that the pair’s price action has been hitting on the upper Bollinger band, which may cause a correction lower. Should the bulls maintain control over the pair, we may see USD/JPY aiming if not reaching the 158.45 (R1) resistance line. A bearish outlook seems currently remote and for its adoption we would require the pair to drop, break initially the prementioned upward trendline in a signal that the upward motion has been interrupted and continue to break the 154.65 (S1) support line, actively aiming for the 151.35 (S2) level.  

Across the Atlantic, we note the release of UK’s GDP rates for Q3, showing a wider-than-expected slowdown in growth for the UK economy over the past quarter. Even worse for the month of September, the UK economy shrunk, while negative signals were sent from the Services, industrial and construction sectors of the economy. We see the case for a darkening of UK’s economic outlook which could weigh on the pound. On a deeper fundamental level, UK Chancellor Reeves seems determined to cut through the red tape in regulation for the UK’s crucial finance industry, which may prove supportive for the pound. BoE on the other hand may be preparing to keep rates unchanged in the December meeting which could support the pound.

GBP/USD continued falling yesterday yet during today’s late Asian session, bounced on the 1.2670 (S1) support line. Nevertheless we intend to maintain our bearish outlook as long as the downward trendline guiding the pair since the 8^th of November remains intact. We also note that RSI indicator is near the reading of 30, implying a strong bearish market sentiment for cable. Please note that the price action has broken the lower Bollinger band in a signal that GBP/USD’s bears may have reached too far and the pair is ripe for a correction higher. Should the bears maintain control over the pair we may see it breaking the 1.2670 (S1) line and start aiming for the 1.2470 (S2) base. Should the bulls take over, we may see the pair reversing course by breaking the prementioned upward trendline and aiming if not reaching the 1.890 (R1) resistance line.     

Other highlights for the day:

Today we get France’s final HICP rate for October, whereas during the American session, we get the US NY Fed manufacturing figure for November. In Monday’s Asian session, we get Japan’s machinery orders rate for September. On a monetary level, we note ECB’s McCaul and Lane speeches today.

USD/JPY Daily Chart

• Support: 154.65 (S1), 151.35 (S2), 149.40 (S3)
• Resistance: 158.45 (R1), 161.90 (R2), 164.50 (R3)

GBP/USD Daily Chart

• Support: 1.2670 (S1), 1.2470 (S2), 1.2300 (S3)
• Resistance: 1.2890 (R1), 1.3040 (R2), 1.3260 (R3)

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Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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