August 11, 2021 15:29:32

We get the release of second quarter UK GDP tomorrow. Although backward looking in nature and often deemed as “stale”, June data will give us an early indication of whether the spread of the Delta variant has held back the UK’s recovery.

Consensus sees q/q growth of 4.8%, two-tenths below the BoE forecast, after the economy contracted 1.6% in the first quarter. Growth has picked up sharply since the double dip recession and is a function of the reopenings.

The release should feed positive expectations that after the “English experiment”, the economy should be back to pre-pandemic levels by year end, even if there is a slight pause over the summer. This scenario would also tally with the cautiously optimistic BoE and its timeline for “modest tightening” of policy outlined last week at the MPC meeting.

GBP/JPY trying to break trendline resistance

GBP/JPY has bounced nicely off the lower Keltner band on three separate occasions over recent months. The pair is currently trading just above the 100-day SMA as bullish momentum has picked up. But prices are now trapped by both the 50-day SMA, which may cross below the 100-day average soon, and the bearish trendline from the pivot high at the end of May. Failure at this resistance zone plus the bearish crossover warns of lower prices, with initial support at this week’s low at 152.57 before more significant support around 151.16/33. A strong GDP print would see the bulls prevail and they will target a push to the pivot high around 156.

GBP/CHF challenging top of the range

This pair has tracked sideways for several months after topping out around 1.3073 at the start of April. The broad 1.2580-1.28 range is now being tested with seven straight days of GBP gains. Momentum is obviously bullish with prices above the 50-day and 100-day SMAs. Again, a strong GDP print will favour sterling bulls and a move up through the topside towards 1.30. Otherwise, play the range with stops above the 1.28 mark and watch the pair fall back towards 1.25.