UK Q3 GDP quickly quashed hopes that a recovery was well under way by posting a -0.4% QoQ contraction vs. expectations for a 0.2% expansion. This coupled with the poor Retail Sales yesterday makes it almost certain in our minds that the November MPC meeting will be more dovish in tone and require an increase in QE beyond the existing GBP175bn. The prospects for GBP from here seem extremely bearish, and we would not be surprised to see a revisit of 1.6250 levels quite soon, and thereafter a return below 1.6000 as the UK economy lags significantly behind its major peers. Whilst GBP notably underperforms, the rest of the major currencies have remained elevated against the USD over the past couple of days. Weaker European equities yesterday gave the USD a platform to claw back some losses in the first part of the day, also helped by the news and releases elsewhere being largely downbeat. The Riksbank set an unexpectedly dovish tone in their meeting statement, while disappointing UK Retail Sales and comments from BoE’s Tucker weighed on GBP. Despite Canadian Retail Sales solidly beating expectations, the warnings from BoC’s Carney that CAD strength was a major risk to the economy and intervention was “always an option” grabbed the bigger headlines. Nevertheless, the subdued data and dovish commentary did little to help the USD later on as US equities rallied strongly into the close, causing the DXY to dip again below the 75.00 level and re-visit the lows at 74.95. Confidence in the global recovery now seems to be firmly entrenched, and from here there are few stimuli that are likely to buck the trend of continued USD-selling. It would likely require strong rhetoric from policy-makers about unfavourable USD-weakness/intervention, a severe correction in equities, or perhaps China’s resilient demand faltering going forward. For now, those triggers do not seem likely to be on the horizon, and even on a technical basis, good support for the USD will not come until even further out, perhaps with EURUSD around or above 1.5350.

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Today's Key Issues (time in GMT):

08:30 GBP Preliminary Q3 GDP, % q/q (y/y) Q3 exp: 0.2 (-4.6) prev: -0.6 (-5.5)
09:00 EUR Industrial orders, % m/m Aug exp: 1.2 prev: 2.6
12:30 USD Existing home sales, % m/m Sep exp: 4.9 prev: -2.7

The Risk Today:

EurUsd The bullish bias remains on this pair in the medium term, with first resistance at 1.5046 and thereafter the 1.5140 key resistance for the bullish channel. Good support lies1.4905, with some bids also likely to come in around 1.4955. There is a good chance of intraday shorting before that important 1.5050 level and long interest for the day around 1.4910. 

GbpUsd GBPUSD's close yesterday remained below 1.6663 (keeping the head and shoulders pattern alive) and after this morning's dismal GDP numbers the pair slump to test previous support around 1.6480-90. This has since crumbled and the pair looks to be targetting next downside level at 1.6320. The neckline of our head and shoulders lies at 1.5800, but before there expect support to come in at 1.6221, 1.6127 1.6750. 

UsdJpy USDJPY continues in its ascending channel but 91.95 has so far provided decent supply to cap further rallies today. First resistance comes in at 91.10, we would look to buy around 90.20, with support below at 89.70. If the 91.95 intraday resistance is breached there are sellers expected at 92.50, but the uptrend should continue if 91.10 stays intact. 

UsdChf The 1.0030 support reamins intact and we have since seen consolidation between this level and the downtrend line around 1.0120. Even with a break above the trend line higher I would still be waiting for a 1.0250 clearance to be on the safe side. A break below 1.0037 has obvious psychological support at 1.0000 and below there a whole heap of congestion to stop any falls being too deep. 

Resistance and Support

EURUSDGBPUSDUSDJPYUSDCHF
1.5346 1.6800 93.10 1.0250
1.5100 1.6740 92.50 1.0186
1.5046 1.6570 91.80 1.0123
1.5045 1.6435 91.70 1.0050
1.4905 1.6320 91.10 1.0037
1.4876 1.6221 88.70 1.0010
1.4842 1.6127 88.00 0.9889
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot