UK's GDP rates under the spotlight

GBP traders are expected to keep a close eye on the release of the UK GDP rates today. The rates are expected to remain at anemic levels if not slow down and in conjunction with BoE’s still ongoing monetary policy tightening cycle could bring the UK economy into a recession. Thus should the release today not excite pound traders we may see it weighing on the sterling. On a technical level, the pound edged lower against the USD yesterday yet cable respected the lower boundary of its sideways motion namely the 1.2675 (S1) support line. We tend to maintain our bias for the sideways motion to continue for the time being, and for a clear-cut bearish outlook, we would require GBP/USD to actually break the 1.2675 (S1) support line and aim for the 1.2485 (S2) support base. Should the bulls take over, we may see GBP/USD reversing course, breaking the 1.2815 (R1) resistance line that is also the upper boundary of its current sideways motion and aim for the 1.2995 (R2) resistance level.

After July’s US CPI rates were released yesterday, we note the release of the US PPI rates for the same month today which are also expected to accelerate. Yet should the rates not hit or surpass their targets we may see the market showing a lukewarm reaction on the dollar. Disney’s (#DIS) announced a hike in subscriptions and Wall Street seems to love it. The earnings report tended to be mixed yet the company’s intentions to continue cutting costs and at the same time announcing a hike in the subscription fees it charges, a scenario that is expected to widen the profit margins of the company boosting its share price. Market worries about the oil demand outlook of China seemed to outweigh OPEC’s optimistic outlook. It should be noted that OPEC expects a healthy oil market in the second half of the year and in 2024, which could boost oil prices, yet the market worries for the economic outlook of China and a possible drop of oil demand tended to weigh.

Yet at this point we would like to reiterate our worries for the outlook of the Chinese economy as the red giant seems to be facing headwinds. It should be noted that also the fact that Country Garden is facing liquidity issues and was downgraded to junk, highlights exactly these issues. On a more macroeconomic level, the deflationary mode and the contraction of imports and exports also highlight the problems and if the market worries intensify we may see it weighing on the Yuan further as well as on the Aussie. JPY continued to weaken and the risk of a verbal market intervention by BoJ seems to grow. JPY continued to weaken as market expectations for BoJ to maintain an ultra-loose monetary policy seemed to intensify yet as the JPY continues to weaken, the possibility of BoJ intervening in the markets at least verbally seems to intensify and if actually so, we may see the Japanese currency suddenly getting some support.

USD/JPY moved upwards aiming for the 145.10 (R1) resistance line. We tend to maintain a bullish outlook for the pair as long as the upward trendline continues to guide the pair and the given that the RSI remains near 70. Should the bulls maintain control as expected, we may see USD/JPY finally breaking the 145.10 (R1) resistance line and aim for the 146.80 (R2) level. Should the bears take over we may see the pair breaking the prementioned upward trendline in a first signal of an interruption of the pair’s upward movement and USD/JPY may continue lower breaking the 143.35 (S1) support line aiming for the 141.90 (S2) support base.

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Today in the European session we note the release UK’s GDP rates for June and Q2 as well as France’s final HICP rate for July. In the American session, we note the release of the PPI rate for July and the preliminary University of Michigan consumer sentiment for August.