Morning Report: GBP GDP, What Will We See?

Key Data Releases Today

0830GMT – GBP GDP y/y exp 3.0% v 3.2%
0830GMT – GBP GDP q/q exp 0.7% v 0.9%
1400GMT – USD New Home Sales (SEP) exp -6.8% v 18%


 

Overview:

Another good day for the Dollar as weekly jobless claims come in better than expected. Relative growth, monetary and fiscal story are all support the currency at the moment.

  • USD is mixed as market drivers shift to individual domestic outlooks.
  • CAD is flat after BoC statement hawkishness was followed by MPR doveishness
  • EUR gained initially on more encouraging than expected PMIs but fell late in the day
  • GBP is weak as retail sales disappointed highlighting economic weakness on back of doveish BoE minutes
  • JPY softens as risk aversion fades
  •  AUD flat – was up initially on improvement in sentiment after China PMI but fell later on better US data.

Key Trades

EURUSD: Short Term Bearish – No Change
USDCAD: Short Term Bullish – No Change
GBPUSD: Bearish – No Change
USDJPY: Bullish – Revised (long positioning increased)
AUDUSD: Short Term Bearish – No Change

Analysis

EURUSD: Short Term Bearish – No Change

  • Shorts opened on bearish H1 break of trendline in line with Order Flow Indicators having crossed to the downside are still in play
  • Daily Order Flow Indicators firmly down in line with OBV – looking for break lower and retest of the NFP low.

Having gained initially on better than expected PMI data the Euro eventually conceded it’s gains on positive weekly jobs data out of US as EuroZone data proved insufficient to alleviate market concerns about the state of the European economy.

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USDCAD: Short Term Bullish – No Change

  • Still holding longs as we tested Friday low and rejected.
  • Longs still in play whilst we hold the bullish trendline and Friday’s low remains unbreached on a closing basis.
  • Daily Order Flow Indicators have crossed lower here and will exit longs and switch to shorts on a price close below yesterdays low.

Mixed day of trading yesterday as initial weakness in the pair was on hawkish BoC tone was overridden by better weekly jobs data. Mixed fundamental factors here are keeping pair very much range-bound currently.

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GBPUSD: Bearish – No Change

Daily Order Flow indicators have crossed lower here where we have exited longs and initiated shorts targeting the NFP lows.

Price fell on Tuesday on a dovish BoE minutes release with policy makers noting increases risk to the UK from a slump in the EuroZone economy. Retails Sales data out Yesterday disappointed, highlighting further weakness in the UK economy as such, the downtrend from summer highs is still very much intact here. GDP data today will be the deciding factor for this trade, a weaker figure is expected and any downside surprise should see the NFP lows tested fairly quickly.

01g

USDJPY: Bullish – Revised (Long positioning increased)

  • Longs are still in play with price continuing to hold the bullish trendline
  • Added to longs on break higher from Friday’s highs inline with Monday’s bullish pin bar against the bullish trendline.

JPY is under-performing as risk aversion subsides and markets refocus on a negative fundamental outlook that includes a softening growth profile and the potential for further central bank action.

01g

AUDUSD: Short Term Bearish – No Change

  • Short from break of Daily pin bar against contracting triangle resistance line.
  • Daily Order Flow Indicators firmly down here, endorsing our bearish view at this stage.
  • Targeting a retest of the NFP lows initially. Refer to AUDUSD analysis for bigger picture.    

Aussie continues to trade in the contracting triangle formation but price action suggesting upside will not be the next move from this level. Having improved initially Yesterday on China PMIs, the pair then conceded gains on better weekly jobs data.

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