FTSE Down with GDP Growth Lower than Expected

UK GDP Growth lower than expected for Q2, on one side sparks hopes of a faster monetary loosening cycle and on the other fears of weak economy.

The Q2 GDP Growth Rate QoQ expanded by 0.5% and YoY by 0.7%, showing increasing economic activity. However, the numbers were less than forecasts of 0.6% and 0.9% respectively.

At the same time, Business Investment rose by 1.4% QoQ for Q2, when analysts had expected a decline of 0.1%. This indicator is a precursor to future economic growth. However, the market still has to deal with government policies.

The recently elected government has made a U-turn on taxes and has stated that there will have to be new tax hikes to bring in line the deficit and national debt. The FTSE is down 0.32% on the day in line with losses from other European indices.

Technical View

The day chart above for the FTSE shows a market in a wide sideways trend. The market has been hovering around the Ichimoku cloud with no clear direction. The RSI is also set within a tight range between 62 and 35, an indication of lack of momentum.

With this technical scenario, I would expect the market to struggle to get past the recent high of 8,419 (red line). And to the downside, I would see a strong support for the market 8,036 (black line).

For the market to reestablish a bull trend we would need to see the market close above the all-time high of 8,481 (orange line). To consider the market in a bear trend, we would need to see a close below the last dip of 7,910 (grey line).