Market Spotlight: S&P Testing Channel Lows Ahead of US GDP

US Adv GDP Up NextOn the back of last night’s FOMC minutes, focus today switches US advanced GDP for Q1. On the back of the prior quarter’s 2.9% reading, the market is looking for an unchanged result today. Clearly, with the recent narrative of surprising resilience in the US economy creating room for the Fed to push ahead with tightening, today’s data will be of high importance.Bullish USD/ Bearish Equities ScenarioIf market forecasts are surpassed, this will further bolster the view that the Fed might lean towards a higher rate increase in March, or a more hawkish outlook. With last nights minutes showing that some Fed members backed a larger hike in January, there is a very real risk of such a move given the recent run of US data we’ve seen. In this scenario, USD is likely to be firmly bid while risk assets should recoil near-term.Bearish USD/ Bullish Equities ScenarioOn the other hand, if today’s data undershoots forecasts, this might suggest that the market has become a little carried away recently with the hawkish Fed perspective. In this scenario, USD is likely to weaken and stocks should see better gains as market pricing leans back towards a smaller .25% hike in March.Technical ViewsS&PThe market is at in interesting point here as we test the bull channel lows. A fresh move higher in USD today should see a downside break of the channel where the big focus will then be a test of the 3910 support. This is a key pivot for the index and a break below here will be firmly bearish. However, if this area holds, or we move higher from current levels, focus will be on the 4153.50 level, a break of which will open the way for a move back up towards 4305 next.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-s-and-p-testing-ch
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