Look Ahead to 25/8/2023: UK consumer confidence; Germany Q2 GDP and Jackson Hole Symposium

(Video Transcript)

Get ready to hear how UK consumers are feeling

Hello, I'm Angela Barnes from IGTV and welcome to your Look Ahead to Friday, 25 August 2023. Let's start in the UK because we're going to have the latest consumer confidence data which is calculated by scoring responses based on positivity or higher, or as you say, aless negative index score indicates more optimism.

The index reached a record low of -49 in September 2022 but tomorrow consumer confidence is expected to be at -29 for August after a figure of -30 in July.

If we look at the pound/US dollar price chart, the pound fell against the US dollar on Wednesday on the back of disappointing economic data that points to a possible recession over the remainder of the year. The pound fell 0.38% against the dollar to $1.26 and it's currently at $1.26 as well today.

The UK readings were particularly stark, with the purchasing managers' index (PMI) readings, with both the services and manufacturing PMIs, falling well short of forecasts and the former deep into contraction territory.

Is the US rally cracking?

Meanwhile the US dollar retreated on Wednesday as well. We could be an early sign of cracks in the rally. The US dollar was hurt by below expected US PMI data and the focus now is going to be on the US Federal Reserve Bank Chair Jerome Powell's speech when he speaks at the Jackson Hole Symposium this week.

He's due to speak on Friday during that three-day meeting of central bankers in Wyoming. And if Powell's turn turns out to be hawkish, guided by the recent strong US data, then a US dollar retreat could be limited.

German Q2 GDP data out

In other economic news, at 9am, Germany's final second-quarter GDP figures will be out. First estimate data show Germany's gross domestic product stagnated at zero growth in the second quarter of 2023, between April and June. We will also get the latest German IFO index data for August, but the business climate is set for a fourth, the IFO business climate is set for a fourth straight month of declines.

Economists see the index falling in the 86.7 in August from 87.3 in July. The survey measures the state of Germany's business environment on a monthly basis with results based on roughly 9,000 survey respondents from German firms in manufacturing, construction, the service sector and in trade.

If we just look at Germany's DAX index today, you can see that it's extending its gains up 0.37% at the moment, continuing its winning streak now for a fourth session. It closed Wednesday up as well, 1,578 points, despite weak economic numbers from Germany this week and the Euro Zone, disappointing also, but so the DAX continuing its rally.

Head-and-shoulders builds in oil market

Let's have a look at commodities because something interestingis happening with US crude oil, WTI crude. But first of all, we can expect on tomorrow at 6pm in the US, we'll get the latest Baker Hughes oil rig count. The Baker Hughes total rig count declined further by 12 last week, taking the total rig count down to 642, which was the lowest count since mid-February 2022.

I want to show you what's happening in crude at the moment, something very interesting to look at. So there's a bit of a head-and-shoulders pattern developing and I have a projection with a price target for you. But just to quickly set this up, we saw the left shoulder pick out here on 1 August at a level of $82 and then came the head and the right shoulder has confirmed the head-and-shoulders pattern with the neckline.

And we have seen in today's trade that we have an entire candle or pretty much all of an entire candle below that neckline, which gives me some sort of confidence that the head-and-shoulders pattern is perhaps now set up. I would draw a line from the top of the head down the neckline and that would give me the height of the head and shoulders pattern and I would take that as a projection, which gives me the price target of $70.82.

And as this pattern works out, that would be your price target and you would take profits at that point. But if, as indeed should always be the case, you put a stop loss in place, my stop loss would go above this $80 level, so about $80.10 might be a good place for your stop loss with a view to giving you some sort of insurance should there be a snap back in trade.

But if the trade continues, as the technicals would suggest, then you have a fairly relatively good ride on the way down at some point in the future to the price target. But this is not a trade recommendation, of course, it's just a purely a set-up based on the technicals around head-and-shoulders patterns. So we'll certainly be keeping an eye on that.

On the corporate front, no big earnings out tomorrow, but plenty for investors to digest this week with results from Zoom and NVIDIA. Well, that's your Look Ahead to 25 Augus 2023. Thank you very much for watching IGTV.