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Natural gas futures (September 2022 delivery) have drifted higher again after their recent downside correction faltered. Even though the latest spike seems to have encountered resistance at the upper Bollinger band, the commodity continues to retain a bullish near-term picture.

The momentum indicators suggest that buyers have regained the upper hand. Specifically, the stochastic oscillator is climbing near the 80-overbought territory, while the RSI is flatlining comfortably above the 50-neutral threshold.

In the positive scenario, the price could ascend to test its recent high of 8.980. Piercing through this region, the spotlight may turn to the 9.400 barrier. An upside violation of the latter could open the door for the 14-year high of 9.630.

On the flipside, should the positive momentum fade and the price reverses down, the 8.160 hurdle could act as the first line of defence. Dipping beneath that region, the bears could aim for the crucial 7.530 support before the attention shifts to the 7.000 psychological mark. Failing to halt there, 6,.450 could prove to be a tough obstacle for the price to overcome.

Overall, natural gas futures appear to have the necessary momentum to push even higher. Nevertheless, a break below the 7.530 and the 50-day moving average might alter their short-term picture back to negative.

The British pound is in negative territory today, after a contraction in UK GDP. In the European session, GBP/USD is trading at 1.2126, down 0.61% on the day.

British economy declines in Q2

The British pound posted dazzling gains on Wednesday, surging 1.19%. The impressive climb was, however, a case of US dollar weakness, rather than any newfound strength in the pound. Inflation in the US was unexpectedly weaker than forecast, which raised market hopes that the Fed will ease policy. This led to the US dollar being less attractive and the currency took a nasty spill against all the majors.

Sterling hasn’t fared as well after the UK posted the second-quarter GDP report. The economy fell in July by -0.1% QoQ, following a 0.8% gain in June (-0.2% exp). On an annualized basis, GDP growth slowed to 2.9%, within expectations but sharply down from 8.7% in Q1. The outlook does not look good as we head towards winter, with UK households about to be hit with sharp increases in energy prices. Consumers are already struggling with a nasty cost of living crisis, and as they tighten the purse strings, the spectre of a recession will become that much more likely.

Another key indicator, Manufacturing Production, came in at -1.6% MoM, down from a 1.7% gain in May (-1.8% exp). This was the fourth decline in five months, pointing to a worrying downtrend in manufacturing.

The week wraps up with UoM Consumer Sentiment, a key confidence indicator. With the cost of living crisis in the US, it’s no surprise that the index has tumbled – falling from 65.7 in March to just 51.5 in June. This points to weak expansion, just above the neutral 50.0 line. The July forecast calls for a slight improvement to 52.5 points.

GBP/USD Technical

• GBP/USD continues to test resistance at 1.2241. Next, there is resistance at 1.2361
•  There is support at 1.2123 and 1.2061

The UK monthly statistics package showed that the economy lost 0.1% in the second quarter (0.2% expected), and the annual growth rate collapsed from 8.7% to 2.9% (2.8% expected). For the month, the decline was 0.6%, half the forecasts.

A similar “better than might have been” is evident in the other indicators released today. Industrial production fell 0.9% against an expected 1.3% and left something from the last month’s gain. Construction dipped 1.4%, against a forecasted 2.0%. The service sector lost 0.4% of its volume, the first contraction since last March.

While this data is better than forecast, it is unlikely to inspire buyers of the pound or investors in the stock market. We see more market sensitivity to price data than the economy.

The GBPUSD is now struggling with downtrend resistance in the form of the 50-day moving average, trying to consolidate higher. On Wednesday, it formally succeeded, but the pound failed to develop the offensive, which might be the first worrying signal that the bears retain control of the markets.

Whether GBPUSD closes the day above 1.22 or below that mark may determine next week’s performance. An ability to stay near or rewrite the local highs would be a bullish signal, sending the sterling further into the 1.25-1.2650 range.

A close on a weak note or a move under 1.2140 would indicate that the recent rebound was only a temporary correction as part of a long-term downtrend. And in this case, GBPUSD could head down with an intermediate target below 1.2000 and a potential next target around 1.1800.

USDCAD has been losing ground in the short term since it peaked at the 20-month high of 1.3222 in mid-July. Moreover, in the last few sessions, the technical picture has deteriorated further, with the price crossing below both its 50-day simple moving average (SMA) and the Ichimoku cloud.

The momentum indicators are reflecting that the latest downside move could resume as near-term risks are tilted to the downside. Specifically, the stochastic oscillator is sloping downwards in the 20-oversold zone, while the MACD histogram is currently beneath both zero and its red signal line.

To the downside, should the price dive below crucial 200-day SMA, immediate support could be encountered at the recent low of 1.2726. Sliding beneath that floor, the 1.2679 barrier may come under examination before the pair challenges the June low of 1.2516. Any further price declines could then cease at the 1.2458 hurdle.

Alternatively, bullish actions might meet initial resistance at the 1.2895 region. Conquering this barricade, the bulls could aim for the recent peak of 1.2983. Failing to stop there, the price could ascend towards 1.3080 or higher to test the 20-month high of 1.3222.

In brief, even though USDCAD has been experiencing a sharp decline, the 200-day SMA appears to be acting as a strong floor. Hence, a violation of the latter could accelerate the downfall.

Eurozone industrial production rose 0.7% mom in June, above expectation of 0.0% mom. Production of capital goods rose by 2.6% mom and energy by 0.6% mom, while production of intermediate goods fell by -0.1% mom, durable consumer goods by -0.6% mom and non-durable consumer goods by -3.2% mom.

EU industrial production rose 0.6% mom. Among Member States for which data are available, the highest monthly increases were registered in Ireland (+6.7%), Malta (+4.8%) and Greece (+3.4%). The largest decreases were observed in Romania (-3.9%), Belgium (-2.2%), Italy and Latvia (both -2.1%).

Full release here.

Daily Pivots: (S1) 161.50; (P) 162.01; (R1) 162.76; More...

Intraday bias in GBP/JPY stays neutral, and consolidation from pattern from 168.67 could extend further. On the upside, above 163.97 will turn bias to the upside, and resume the rebound to 166.31 resistance. Break there will be the first sign of up trend resumption. On the downside, break of 159.42 will extend the correction towards 155.57 support.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 136.60; (P) 137.00; (R1) 137.70; More....

Intraday bias in EUR/JPY remains neutral for the moment. On the upside, break of 138.38, and sustained trading above 55 day EMA (now at 138.44) will suggest that whole correction from 144.26 has completed. Further rally would then be seen back to retest 144.26 high. However, break of 135.63 will turn bias back to the downside for 133.38 low instead.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Next target is 149.76 (2015 high). However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Daily Pivots: (S1) 0.8437; (P) 0.8454; (R1) 0.8479; More...

Intraday bias in EUR/GBP remains neutral at this point. Outlook stays bearish with 0.8585 resistance intact. Fall from 0.8720 is expected to resume sooner or later. Break of 0.8338 will turn bias to back to the downside for retesting 0.8201 low.

In the bigger picture, current development suggests rejection by 38.2% retracement of 0.9499 to 0.8201 at 0.8697. Medium term bearishness is maintained. Break of 0.8201 will resume larger down trend from 0.9499 (2020 high). Nevertheless, sustained break of 0.8697 will affirm the case that rise from 0.8201 is a medium term up trend itself.

Daily Pivots: (S1) 1.4498; (P) 1.4534; (R1) 1.4562; More...

EUR/AUD's fall from 1.5396 resumes by breaking through 1.4508 support. Intraday bias is back on the downside for retesting 1.4318 low. Decisive break there will resume larger down trend. On the upside, break of 1.4804 resistance is needed to indicate short term bottoming. Otherwise, risk will stay on the downside in case of recovery.

In the bigger picture, down trend from 1.9799 is still in progress. Break of 1.4318 low will target 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). This will remain the favored case now as long as 1.5396 resistance holds.

Daily Pivots: (S1) 0.9697; (P) 0.9715; (R1) 0.9734; More....

EUR/CHF's down trend resumes by breaking through 0.9697 support. Intraday bias is back on the downside for 0.9650 long term projection level. Some support could be seen there to bring rebound. But break of 0.9799 resistance is needed to signal short term bottoming. Otherwise, further decline will remain in favor. Firm break of 0.9650 will target 100% projection of 1.1149 to 0.9970 from 1.0513 at 0.9334.

In the bigger picture, long term down trend from 1.2004 (2018 high) is expected to target 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. Firm break there will target 138.2% projection at 0.9033. On the upside, break of 0.9799 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of strong rebound.