Two trades to watch: FTSE, GBP/USD

FTSE falls as Chinese GDP disappoints

The FTSE. Along with other European indices, is heading lower following disappointing Chinese GDP data.

Chinese GDP rose at 4.9% YoY down from 7.9% growth recorded in August and softer than the 5.2% forecast. The economic recovery stumbled in China amid the energy crunch, supply chain issues and the ongoing debt crisis at Evergrande.

Offering some support to the UK index and capping losses are firmer oil prices. Oil majors are likely to open higher.

Where next for the FTSE?

The FTSE broke out above its falling trendline resistance last week. After reaching a fresh post pandemic high of 7250 overnight the FTSE is easing lower. It trades capped on the upside by 7250 and on the lower side at 7165 a level which has offered both support and resistance since May.

The MSCD is supportive of further upside. However, after jumping almost 2% last week some consolidation between 7250 and 7165 could be on the cards.

It would take a move 7165 for sellers to extend losses towards the 50 sma at 7105 and bears to gain momentum.

GBP/USD eases on USD strength, despite hawkish BoE

GBP/USD is edging lower on the broad US Dollar rebound and despite hawkish comments from BoE Governor Andrew Bailey over the weekend.

Andrew Baily gave fresh signals that the BoE was gearing up to raise interest rates in order to bring elevated inflation under control. The CME Group BoE watch tool puts a 70% probability on a rate hike in December.

The US Dollar is rebounding higher on safe haven flows and tracing treasury yields northwards. High inflation concerns remain amid rising energy prices and following Friday’s upbeat retail sales.

Looking ahead US industrial production is expected to ease to 0.2% MoM down from 0.4%.

Where next for GBP/USD?

GBP/USD has been extending its rebound from 1.3430 struck as the start of the month retaking the 50 sma on the daily chart. However, the pair once again faced rejection at the falling trendline resistance dating back to mid-May.

GBP/USD currently trades caught between the 50 sma at 1.3715 on the downside and the falling trendline resistance at 1.3765 on the upside. The RSI is mildly above 50 but points lower.

It could be prudent to wait for a breakout trade. Sellers looking for a move below 1.3716 to target 1.3670 high October 11.

On the flip side a move over the resistance trendline at 1.3765 could see 1.38 psychological level and 1,3850 the 200 sna come into focus

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