Final US GDP rate for Q2 to be released

The USD edged higher across the board in the FX market yesterday, regaining the losses of Tuesday. Today we note the release of the final US GDP rate for Q2. The release could support the narrative for a soft landing of the US economy should it remain unchanged at 3.0% yoy as expected. On the other hand, a possible considerable slowdown if compared to the revised rate for the same quarter could intensify market worries for the outlook of the US economy and at the same time, intensify also market expectations for a deeper and faster easing of the Fed’s monetary policy over the coming months. Hence we may see some bearish tendencies for the USD in case the rate slows down. On the monetary front, we highlight the wide number of Fed policymakers, which are scheduled to speak today and should they stick to the bank’s dovish script we may see the USD slipping further, otherwise we may see some support building up for the greenback.

USD/JPY moved higher yesterday using the 143.40 (S1) line as a jumping platform and confirming its role as a support level. We tend to maintain a bullish outlook for the pair’s price action as long as the upward trendline guiding the pair since the 16^a. of September remains intact. On the flip side, we note that the RSI indicator has moved higher yet seems to be flattening at the reading of 50, implying a relatively indecisive market, so some stabilisation efforts may be present. Should the bulls remain in charge as expected, we may see the pair aiming if not breaking the 146.00 (R1) line, thus paving the way for the 149.40 (R2) level. For a bearish outlook USD/JPY would have to break the prementioned upward trendline in a first signal that the upward motion has been interrupted, break the 143.40 (S1) line and take aim of the 140.30 (S2) base.

In the European theatre we highlight from Switzerland the release of SNB’s interest rate decision. The bank is expected marginally to cut rates by 25 basis points with CHF OIS implying a probability of 54.66% for such a scenario to materialise and the other 45% implies that 50 basis points rate cut is also possible. Should the bank proceed with a 25-basis points rate cut as expected we may see the CHF getting some support as the rest of the market may have to reposition itself in disappointment, while the possibility of a market intervention is always on the table for the SNB.     

USD/CHF rose yesterday yet its price action seems to resemble a sideways motion between the 0.8550 (R1) resistance line and the 0.8375 (S1) support line. We maintain our sideways motion bias given the pair’s recent movement, the RSI indicator which remains near 50, implying a rather indecisive market and the narrow Bollinger bands, implying less volatility for the pair, which could allow the sideways motion to continue. If buyers take over, we may see USD/CHF breaking the 0.8550 (R1) resistance line and aiming for the 0.8750 (R2) resistance level. Should sellers be in charge of the pair’s direction, we may see USD/CHF breaking the 0.8375 (S1) support line thus opening the gates for the 0.8190 (S2) support barrier, which was the halting point for the bearish movement of the pair at SNB’s 2015 surprise market intervention operation.   

Other highlights for the day:

Today in the European session, we get Germany’s GfK Consumer sentiment for October, and on the monetary front ECB’s Elderson and McCaul speak. In the American session, we get from the US the durable goods orders for August and the weekly initial jobless claims figure. On the monetary front, we note that Boston Fed President Collins, Fed Governor Bowman, NY Fed President Williams, Fed Vice Chair Barr, Fed Board Governor Cook and Minneapolis Fed President Kashkari are speaking. From the ECB we note that ECB President Christine Lagarde, ECB Board Member Buch, ECB Vice President De Guindos and ECB Board Member Schnabel are scheduled to speak. During tomorrow’s Asian session, we get from Japan Tokyo’s CPI rates for September while from the US, Fed Board Governor Cook is scheduled to speak.

USD/JPY Daily Chart

• Support: 143.40 (S1), 140.30 (S2), 137.25 (S3)
• Resistance: 146.00 (R1), 149.40 (R2), 151.95 (R3)

USD/CHF Daily Chart

• Support: 0.8375 (S1), 0.8190 (S2), 0.8050 (S3)
• Resistance: 0.8550 (R1), 0.8750 (R2), 0.8850 (R3)

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