Is the UK in trouble as GDP reveals 0.3% negative growth for Q1?
Daily Outlook - 28th June 2012
Written by Zoe Fiddes
CURRENCY TRADING SUMMARY 28/06/2012
Sterling- dollar came under heavy selling pressure in the London open ahead of the UK GDP announcement, in the expectation of negative growth. The forecast was correct as GDP came out at -0.3% for Q1. This means that the UK economy has shrunk for two subsequent quarters. The pair dropped from 1.5618 down to 1.5527 from 7:00am BST as traders priced in the result which was released at 09:30am. Now it trades at 1.5550 but it sits heavy with support at 1.5527 from the intraday low, and the resistance lies at 1.5615 (overnight highs). We have another GDP result today from the States at 13:30 BST which is expected to show growth at a rate of 2.1% for Q1, volatility is likely to increase again as this data is seen as critical to the market herds next USD direction.
Euro-dollar tumbled along with cable in advance of the disappointing UK GDP result. The pair moved from 1.2520 down to a 1.2406 low, and it now trades at 1.2427 as the market consensus is to not take this pair below the 1.2400 big figure this time. There was also important results from the Eurozone today in the way of economic, industrial, service and consumer sentiments, this appears to have had little effect on pricing despite sentiment on the service and industrial sector being worse than expected. From a technical stance 1.2400 is the initial support, last tested June 5th, and 1.2440 may act as a near-term resistance. The US GDP data this afternoon is likely to liven up price action and the moves in the US dollar pairs.
Dollar-yen didn’t budge on the news this morning as the JPY is segregated from the UK news, we saw a small move down from 79.44 to 79.22. There is a preference to sell, with entrance point near 79.60 in mind. The initial support lies at 79.2. The RSI is lacking any upward moment an indication that the price may come lower. This pair is more likely to react to the US data later today.
Aussie-dollar, like the other majors, fell enormously this morning on US dollar strength ahead of the UK GDP announcement. The pair dropped from 1.0120 down to 1.0057, and has since made a recovering to 1.0080 as the market consensus recoiled off an overbought USD. In the short-term technical analysts have a preference to buy from the 1.0060 pivot point with 1.0120 as the initial profit target as the immediate trend remains up and the moment is strong. Again the US data is likely to cause volatility on moves in USD strength which would affect the pricing of the major pairs.
XAU/USD saw some good moves higher yesterday on the back of some short covering and safe haven buying, talking the precious metal to a European session high of 1583. Overnight, however, sentiment seemed to turn to the bearish side with gold only managing a high of 1579 before steadily falling to end the session at 1569. The EU economic summit will be watched closely, but expectations are low for any meaningful resolution. Looking ahead, technical analysis has a preference to sell gold at a pivot of 1583 with support at 1562 and 1554.
OIL/USD experienced a rally in yesterdays European session, achieving a high of 80.84 before range trading took hold overnight. Oil started the Asian session at 80.50 and proceeded to range between 80.26/69 before managing to break support later in the session and finally close at 79.87. Going forward, technical analysis is pointing to a higher day for oil with a pivot of 78.90 and resistance at 80.60 and 81.40.
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