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UK Q3 GDP growth was finalized at 0.6% qoq, unrevised. Annually, GDP grew 1.5% yoy, revised up by 0.1%. ONS noted that "services remained the strongest contributor to growth in the output approach to GDP in Quarter 3 2018, with growth easing slightly from the previous quarter; construction and manufacturing also contributed positively to growth."

At the same time, ONS also said "In comparison with the same quarter a year ago, the UK economy has grown by an unrevised 1.5%. This is a slight pickup from previous quarters in the year, although the longer-term picture remains one of relatively subdued growth compared with historic standards"

Also from UK, current account deficit widened to GBP -26.5B in Q3, larger than expectation of GBP -22.2B. Public sector net borrowing rose to GBP 6.3B in November, below expectation of GBP 7.0B

The Euro eases from new six-week high at 1.1485, posted after strong rally on Thursday, where bulls were capped by 100SMA and consolidating in the middle of thick daily cloud.

Yesterday’s close within the cloud was bullish signal after falling thick daily cloud capped several attempts, but fresh bulls failed to close above pivotal Fibo barrier at 1.1444 (38.2% of 1.1815/1.1215 descend), despite spike to 1.1485.

Profit-taking after the biggest one-day gains in Dec on Thursday could push the price lower, with momentum and slow stochastic turning south on daily chart and supporting scenario.

Strong supports at 1.1396/88 (55SMA / daily cloud base) are expected to contain extended dips and keep fresh bulls in play.

The pair is on track for strong weekly close and forming weekly bullish engulfing, which could be another supportive factor.

Bulls need close above 1.1444 Fibo barrier to generate fresh bullish signal for extension through 100SMA and test of next key barrier at 1.1515 (50% of 1.1815/1.1215 / daily cloud top) break of which would signal reversal.

Conversely, return and weekly close below daily cloud would weaken near-term structure and signal an end of recovery phase.

With no releases from the EU, focus turns towards a batch of key US data, due later today (GDP,Retail Sales,Durable Goods Orders) which would provide fresh signals.

Res: 1.1444,1.1485,1.1499,1.1515
Sup: 1.1412,1.1396,1.1388,1.1350

The USD weakened against a number of its counterparts yesterday, as a subdued outlook on US interest rates and the economy weighed on the greenback. The Fed’s outlook accelerated the slide of the US treasury yields, as caution had already started to settle in. Also the threat of a possible partial federal government shutdown, added to the overall effect of the risk off sentiment. Analysts, see the weakening of the USD, as a classic case of risk off lifting the yen against the USD, which was not happening in the past few months. Analysts also point out that, US markets, particularly equities could be dictating direction for the USD in the near term. We see the case for the USD to remain under pressure as we may have to wait until New Year for the risk off sentiment to settle. USD/JPY tumbled yesterday, breaking consecutively the 112.15 (R2) and the 111.65 (R1) support levels (now turned to resistance) and stopped the fall at the 111.15 (S1) support line. Should the bearish sentiment on the USD continue for today, we could see the pair dropping even lower. Please be advised that, the RSI indicator in the 4 hour chart has reached a reading below 30, implying a rather overcrowded short position. Should the bears continue to dictate the pair’s direction in today’s European and American sessions, we could see it breaking the 111.15 (S1) support line and aim if not break the 110.70 (S2) support level. Should on the other hand the bulls take over, we could see the pair rising, breaking the 111.65 (R1) resistance line and aim for the 112.15 (R2) resistance zone.

BoE remains on hold and the pound weakened

Bank of England kept interest rates on hold at 0.75% as was widely expected, warning about the risks of a no deal Brexit, causing the pound to weaken. BoE’s meeting minutes showed a very uncomfortable position for the bank, surrounded by the political chaos of a no deal Brexit. The BoE stated that Brexit uncertainty had “intensified considerably” over the past month and inflation could drop below 2%, by falling oil prices. Analysts, point out that the inflation pressures may not be so significant for the bank to prepare the markets for and if the BoE’s aim had been not to move the market’s, then that’s what they achieved, according to media. We expect the pound to remain under pressure for the near term as Brexit uncertainty continues. Cable resembled a battle of the weakest at some points yesterday, yet remained range bound between the 1.2700 (R1) resistance line and the 1.2630 (S1) support level. The sideways movement of the pair could be maintained today, however the pair could prove sensitive to any Brexit headlines as well as USD’s bearish sentiment. Should the market start favoring long positions of the pair, we could see cable breaking the 1.2700 (R1) resistance line and aim for the 1.2795 (R2) resistance barrier. On the other hand, should the pair come under the selling interest of the market, we could see its price action breaking the 1.2630 (S1) support line and aim for the 1.2555 (S2) support zone.

In today’s other economic highlights:

In today’s European session, we get Germany’s GfK Consumer Sentiment for January and from the UK the final GDP growth rate for Q3 and the current account balance for Q3. In a busy American session, we get from the US the durable goods orders growth rates for November, the final release of the GDP for Q3, the consumption growth rate and the Core PCE price index for November, the final Michigan Consumer Sentiment for December and the Baker Hughes oil rig count. From Canada we get the GDP and the retail sales growth rates for October. From the Eurozone we get the preliminary consumer confidence indicator December. From all of us here at IronFX we would like to wish you solid trading and best wishes for a merry Christmas.

USD/JPY H4

Support: 111.15 (S1), 110.70 (S2), 110.30 (S3)
Resistance: 111.65 (R1), 112.15 (R2), 112.72 (R3)

GBP/USD H4

Support: 1.2630 (S1), 1.2555 (S2), 1.2485 (S3)
Resistance: 1.2700 (R1), 1.2795 (R2), 1.2880 (R3)

Global markets continue to lose its positions. Overnight Nasdaq Index was one step away from the bear market threshold, at one point losing more than 20% from the peak values reached in October. S&P500 lost 1.6% on Thursday. The futures for index losing another 0.2% on Friday morning, although it is trading somewhat higher than intraday lows on previous day.

Along with the stock markets, long-term US government bonds yield falls, reflecting uncertainty about growth prospects and inflation. This fact puts pressure on the dollar, that lost 0.6% yesterday, the sharpest decline in two months.

This quarter may become the worst for the US stock markets in the last 10 years, reflecting the losses of the company’s total capitalization by 15%. Chinese blue chips have lost 13% of their cap at the same period, sinking to the lows since May 2017.

Interestingly, on Wednesday during FOMC press-conference Powell noted that “this is the best year since the financial crisis”. Very often, markets enter the bear market phase amid recessions, but not this time. It’s worth agreeing with Powell that the US economy is in great shape, but it wouldn’t be wise to completely ignore the stock market signals that economy have peaked.

The impulse of decline in stocks intensifies by concerns around possible partial federal government shutdown. Trump refused to sign legislation to government funding while it opposes the construction of a wall on the border with Mexico.

The fact of suspension of financing for some time yet becomes an act of political struggle and seldom seriously presses on markets, but the news has fallen on fertile ground as the markets already felt anxiety around short-term rates growth and declining forecasts of the companies’ incomes due to the slowdown of the world economy.

Interestingly, on Wednesday during FOMC press-conference Powell noted that “this is the best year since the financial crisis”. Very often, markets enter the bear market phase amid recessions, but not this time. It’s worth agreeing with Powell that the US economy is in great shape, but it wouldn’t be wise to completely ignore the stock market signals that economy have peaked.

The impulse of decline in stocks intensifies by concerns around possible partial federal government shutdown. Trump refused to sign legislation to government funding while it opposes the construction of a wall on the border with Mexico.

The fact of suspension of financing for some time yet becomes an act of political struggle and seldom seriously presses on markets, but the news has fallen on fertile ground as the markets already felt anxiety around short-term rates growth and declining forecasts of the companies’ incomes due to the slowdown of the world economy.

The US dollar is declining against a basket of major currencies after news from the United States. The US President, Donald Trump, refuses to sign a short-term funding bill because it does not provide funds for the construction of the wall between the US and Mexico. Such a decision may suspend the work of the government. The dollar index (#DX) updated monthly lows and closed yesterday in the negative zone (-0.78%).

The euro strengthened against the US dollar as it became known that an agreement on the Italian budget was still officially concluded. Economic data from the UK and the US was also published yesterday. The volume of retail sales in the UK rose by 1.4% in November and was better than the forecasted value of 0.3%. The Bank of England left the interest rate unchanged at 0.75%, as experts expected. Philadelphia Fed manufacturing index in the United States fell in December to 9.4 instead of 15.6.

The "black gold" prices are moderately recovering after the collapse the day before. At the moment, futures for the WTI crude oil are testing the mark of $46.40 per barrel.

Market Indicators

• Yesterday, aggressive sales were observed in the US stock market: #SPY (-1.63%), #DIA (-1.94%), #QQQ (-1.45%).
• The 10-year US government bonds yield has continued to decline. Currently, the indicator is at the level of 2.79-2.80%.

The news feed on 21.12.2018:

• UK GDP data at 11:30 (GMT+2:00);
• Core durable goods orders in the United States at 15:30 (GMT+2:00);
• Report on the US GDP at 15:30 (GMT+2:00);
• GDP data in Canada at 15:30 (GMT+2:00).

Daily Pivots: (S1) 140.28; (P) 141.19; (R1) 141.80; More...

GBP/JPY's break of 141.17 confirms resumption of fall from 149.48. Intraday bias is back on the downside. current fall should now target 139.29/47 key support zone. On the upside, break of 143.94 resistance is needed to indicate short term reversal. Otherwise, outlook will remain bearish even in case of recovery.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, up trend from 122.36 (2016 low) could still extend beyond 156.69 high. However, decisive break of 139.29/47 will suggest that such up trend is completed and turn outlook bearish. In that case, next target is 61.8% retracement at 135.43.

Daily Pivots: (S1) 126.94; (P) 127.67; (R1) 128.11; More....

EUR/JPY drops to as low as 126.87 as fall from 130.14 resumed finally. Intraday bias is back on the downside for 126.63 low first. Break will then resume the whole decline from 133.12 to 124.08/89 support zone. On the upside, break of 128.38 resistance is now needed to indicate near term bottoming. Otherwise, outlook will remain cautiously bearish even in case of recovery.

In the bigger picture, as long as 124.08 key resistance turn supported holds, larger up trend from 109.03 (2016 low) could still resume. Firm break of 137.49 structural resistance will target 141.04/149.76 resistance zone next. However, decisive break of 124.08 will argue that such rise from 109.03 has completed and turn outlook bearish. In that case, deeper fall would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90.

Daily Pivots: (S1) 0.9015; (P) 0.9036; (R1) 0.9065; More...

EUR/GBP continues to stay in consolidation from 0.9086 and intraday bias remains neutral first. As long as 0.8931 resistance turned support holds, further rise is expected. On the upside, decisive break of 0.9098 resistance will extend the rally from 0.8655 and target 0.9304 key resistance next. However, considering bearish divergence condition in 4 hour MACD, firm break of 0.8931 will indicate near term reversal and target 0.8810 support and below.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). It should be in medium term rising leg for 0.9304. Meanwhile, in case of another fall, down side should be contained by 0.8620/55 support zone to bring rebound.

Daily Pivots: (S1) 1.5851; (P) 1.5947; (R1) 1.6099; More....

Intraday bias in EUR/AUD remains on the upside at this point. Current rise from 1.5346 is in progress for retesting 1.6357 high. At this point, we'd be cautious on topping around there to bring pull back. On the downside, break of 1.5887 resistance turned support is needed to indicate short term topping. Otherwise, near term outlook will remain bullish in case of retreat.

In the bigger picture, no change in the view that 1.6357 is a medium term top. But the strong rebound ahead of 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313) suggests price actions from 1.6357 are developing into sideway consolidation, rather than a deep correction. The range of 1.5271/6357 is likely set for the consolidation. And we don't expect a break of the range any time soon. But decisive break of 1.6357 will resume the larger up trend from 1.3624 (2017 low) to 1.6587 (2015 high).

Daily Pivots: (S1) 1.1287; (P) 1.1318; (R1) 1.1339; More...

EUR/CHF lost momentum again after hitting 1.1348 and intraday bias is turned neutral first. At this point, we're still favoring the case the choppy fall from 1.1501 has completed at 1.1224, on bullish convergence condition in 4 hour MACD. Hence, downside of current retreat should be contain well above 1.1224 to bring another rally. On the upside, break of 1.1348 will target a test on 1.1501 key resistance.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.