Revised US GDP rate for Q2 eyed

The USD regained some of last week’s losses yesterday against its counterparts in the FX market. Market focus is on Friday’s Core PCE price index for July, yet before that we highlight today the release of the revised GDP rate for Q2 of the US. The rate is expected to remain unchanged to the preliminary release at 2.8% qoq on an annualised basis. Such a reading or even higher, may ease the market’s worries for the outlook of the US economy and support the Fed’s narrative for a possible soft landing. A significant miss though could create substantial market volatility in USD pairs as it would alter the market’s perceptions and force it to reposition itself.

USD/JPY rose slightly yesterday as it bounced on the 143.40 (S1) support line, yet the overall movement tended to resemble a relative stabilisation of the pair over the past three days. We note that the pair’s price action is putting the downward trendline that has been guiding it since the 16 of August, to the test. On the other hand, the RSI indicator remains just above the reading of 30, implying the presence of a bearish sentiment of the market for the pair. For the bearish outlook to continue we would require the pair to break clearly the 143.40 (S1) support line, setting in its sights the 140.30 (S2) support barrier. Should the bulls take over, we may see the pair reversing direction, breaking initially the prementioned downward trendline, signalling a clear interruption of the downward motion and continue higher to break the 146.00 (R1) resistance line thus paving the way for the 148.90 (R2) resistance hurdle.

US stock markets yesterday fell uniformly, as all three major US stock market indexes, the Dow Jones, S&P 500 and Nasdaq found themselves in the reds. Also, NVIDIA’s earnings report despite showing improved and better than expected revenue and EPS figures, the company’s forward guidance tended to disappoint the markets. The release was reported having an adverse effect on the share’s price in the aftermarket hours.

Back in the FX market, we highlight the release of Germany’s preliminary HICP rates for August. The headline rate is expected to slow down to 2.3% yoy if compared to last month’s rate of 2.6% yoy. Should inflationary pressures in the largest economy of the Eurozone ease as expected or beyond, we may see the release serving as a prelude for an easing of inflationary pressures in the Eurozone. Such data could weigh on the common currency as it could enhance the market’s expectations for the ECB to continue cutting rates in the coming months. EUR traders are also expected to keep an eye out for the release of Eurozone’s Business Climate, economic sentiment, industrial sentiment and consumer confidence, all being for August, while on the monetary front we highlight the speech of ECB’s chief economist Philip Lane.

EUR/USD dropped yesterday, breaking the 1.1140 (R1) support line, now turned to resistance. The pair’s downward movement broke the upward trendline guiding the pair since the 2^nd of August, hence we switch our bullish outlook in favor of a sideways motion bias initially. The RSI indicator despite correcting lower is still at relatively high levels, implying that bullish sentiment may not have been totally abandoned by the market. Should the buying interest be rejuvenated we may see the pair’s price action breaking the 1.1140 (R1) resistance line clearly and taking aim if not breaking the 1.1275 (R2) resistance base. Should sellers be in the drivers seat, we may see the pair reaching if not breaching the 1.1010 (S1) support line.

Other highlights for the day

Today we get Sweden’s final GDP rate for Q2. Later we get Canada’s Business barometer for August, the weekly US initial jobless claims figure and Canada’s current account balance for Q2, while Atlanta Fed President Bostic is speaking. During Friday’s Asian session, we get from Japan Tokyo’s CPI rates for August and Australia’s retail sales for July.