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Trading the News: U.S. Gross Domestic Product (GDP) (based on dailyfx article)
The advance Gross Domestic Product (GDP) report may heighten the appeal of the U.S. dollar as the world’s largest economy is expected to grow an annualized 3.0% in the second-quarter.
What’s Expected:
Why Is This Event Important:
A marked rebound in the growth rate may spark a greater dissent within the Federal Open Market Committee (FOMC) as a growing number of central bank officials scale back their dovish tone for monetary policy, and Chair Janet Yellen may come under increased pressure to normalize monetary policy sooner rather than later as the outlook for growth and inflation improves.
The pickup in wage growth along with the ongoing improvement in the labor market may generate a better-than-expected GDP print, and a large uptick in the growth rate may generate a bullish reaction in the greenback (bearish EUR/USD) as it fuels interest rate expectations.
However, sticky inflation paired with the persistent slack in the housing market may weigh on the growth rate, and a disappointing GDP release may spur a near-term selloff in the reserve currency as it gives the Fed greater scope to retain its highly accommodative policy stance for an extended period of time.
How To Trade This Event Risk
Bullish USD Trade: U.S. Economy Expands 3.0% or Greater
- Need to see red, five-minute candle following the release to consider a short trade on EURUSD
- If market reaction favors a long dollar trade, sell EURUSD with two separate position
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit; set reasonable limit
Bearish USD Trade: 2Q GDP Reading Disappoints- Need green, five-minute candle to favor a long EURUSD trade
- Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The ReleaseEUR/USD Daily
- Despite oversold RSI signal, downside targets remain favored
- Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
- Interim Support: 1.3370 (38.2% retracement) to 1.3380 (38.2% expansion)
Impact that the U.S. GDP report has had on EUR/USD during the last release(1 Hour post event )
(End of Day post event)
2014
USD/CAD Daily Outlook
Daily Pivots: (S1) 1.0809; (P) 1.0837; (R1) 1.0878; More...
USD/CAD's rally extends to as high as 1.0865 so far and intraday bias remains on the upside. As noted before, that correction from 1.1278 has completed at 1.0620 already, just ahead of 1.0608 key cluster support and long term trend line. Rise from 1.0620 should extend to 1.0960 resistance next. Sustained break there will pave the way for retest of 1.1278 high. on the downside, below 1.0795 minor support will turn bias neutral and bring consolidations. But downside should be contained above 1.0708 support and bring another rise.
In the bigger picture, there is no clear sign that the whole up trend from 0.9633 and 0.9406 is reversing. We'll stay medium term bullish as long as 1.0608 support holds (61.8% retracement of 1.0181 to 1.1278 at 1.0600). Rise from 0.9406 is viewed as the third leg of the pattern from 0.9056 (2007 low) and is still expected to extend to 61.8% retracement of 1.3063 to 0.9406 at 1.1666 in medium term after completing the correction from 1.1278. However, sustained break of 1.0608 will argue that the medium term trend has reversed and will turn outlook bearish.
USD/JPY Daily Outlook
Daily Pivots: (S1) 101.90; (P) 102.03; (R1) 102.23; More...
Intraday bias in USD?JPY remains on the upside for 102.26 resistance. As noted before, the choppy fall from 102.79 has completed at 101.06 already. Break of 102.26 will confirm this bullish case and target 102.79 resistance and above. Overall, the pair is still bounded in the sideway pattern from 100.75 and we'd expect more sideway trading ahead. On the downside, below 101.71 minor support will turn bias back to the downside.
In the bigger picture, at this point, there is no confirmation of medium term reversal yet even though bearish divergence condition was clear in weekly MACD. Attention remains on 100.61 key support level and decisive break there will confirm the bearish case. In that case, deeper decline should be seen back to 38.2% retracement o 75.56 to 105.41 at 94.00. In case of another rise, we'll focus on reversal as it approaches 50% retracement of 147.68 to 75.56 at 111.62.
GBPJPY – Forming Coiling PA + Series of Inside Bars
For the last 8 days, the GBPJPY has been coiling in a very small range of about 60 pips, forming several inside bars in a ‘coiling’ like price action. In most cases, when the price action coils like this, it usually results in a very large breakout due to the compression in volatility, and then big expansion triggering a heavy imbalance in the order flow directionally.
For now, the pair is sitting above a key role reversal level in 172.7550 If this level folds, then 171 and 170 should be under attack on the quick. If the pair breaks heavy to the upside, then 174.25 and 175.15 will be put to the test. so watch for a break soon.
Is GBP/USD Oversold And Ready For A Rebound?
It is difficult to understand how the GBP/USD has sharply transitioned from registering a new 5-year high (1.7189) to recording eight days of successive losses for the first time since May 2010. The pair declined by a further 50 pips and reached a six-week low on Tuesday after the latest UK Mortgage Approvals were stronger than expected. Bank of England (BoE) Governor, Mark Carney had previously expressed opinion that the UK housing sector posed one of the largest threats to the UK economy.
A major contributing factor behind the recent GBPUSD decline is not necessarily due to faltering UK economic optimism, but due to international geopolitical tensions attracting the attention of the financial markets. Over the past week, investors have been attracted to safe havens, such as the USD, and this has devalued the GBP/USD.
Looking at the Daily timeframe, as long as geopolitical tensions quieten down technical traders could now be observing an ideal time to look into this pair. Both the Stochastic Oscillator and RSI are each suggesting that the GBP/USD is oversold and looking at the historical correlation between these two momentum indicators, the price seems to quickly rebound after approaching the oversold boundaries. Additionally, the pair is now only a fractional distance away from a bullish trendline that has controlled the overall direction of the GBP/USD since November 2013. If the trendline is touched, it should either act as a dynamic support level or further support can be found at 1.6919.
In order for the GBPUSD to bounce back, the bulls need a reason to rally. Tomorrow afternoon, the US 2nd Quarter GDP release may provide an opportunity. It is currently expected that the US GDP will be announced at around 3%, but the markets will be keeping a very close eye on what proportion of the 1st quarter GDP contraction was recovered in the following quarter.
I remain unconvinced that the US economy recovered as much of the 2.9% Q1 contraction as currently expected. A large amount of the economic contraction was caused by reduced consumer expenditure and construction activity. Recent US consumer data can be considered soft, such as the past three Advance Retail Sales missing expectations, alongside average wage growth declining. This raises a threat that a proportion of the reduced consumer expenditure in Q1 (which reportedly accounts for 70% of the overall US GDP), might not have been recovered in Q2. In reference to the US construction sector, it is possible projects that were delayed during the atrocious winter weather period have since commenced, but only 6,000 construction jobs were created by the US economy in June. Furthermore, the US construction sector remains over 20% bellows its peak before the global financial crisis emerged.
If the US GDP does disappoint, this will likely bring some risk appetite back into the currency markets. It will also allow an opportunity for the GBPUSD to begin rebuilding some of the previous week’s lost momentum. Due to the UK economic calendar being light this week, exactly how the markets react to the US GDP release will likely determine the GBPUSD’s next move. In regards to the next noticeable economic release from the United Kingdom, RBS are currently suggesting that Friday’s Manufacturing PMI for June will be recorded at a yearly high.
If this is confirmed, we can expect the GBP bulls to wake up.
Written by Jameel Ahmad, Chief Market Analyst at FXTM.
Daily Forex Update: USD/CAD
USD/CAD continues to rise after the recent breakout of the 4-hour key resistance level 1.0834 that was earlier identified by Autochartist –as you can see below. The pair is expected to rise to the target level 1.0914 in the coming trading sessions. This key resistance breakout follows the earlier breakout of the weekly Falling Wedge from March. This Falling Wedge was broken by the upward impulse from the support zone lying at the intersection of the weekly support trendline from September of 2009 and lower weekly Bollinger Band (as you can see from the weekly USD/CAD chart below).
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The weekly USD/CAD chart below shows the longer-term picture of this pair’s movement:
Aussie Extends Its Losses In The Asian Session
For the 24 hours to 23:00 GMT, the AUD weakened 0.24% against the USD to close at 0.9386 following upbeat data from the US.
LME Copper prices declined 0.2% or $16.0/MT to $ 7116.0 /MT. Aluminium prices declined 0.7% or $13.5/MT to $ 1974.0 /MT.
In the Asian session, at GMT0300, the pair is trading at 0.9379, with the AUD trading 0.07% lower from yesterday’s close.
Earlier this morning, data from China, Australia’s biggest trading partner showed that the Westpac-MNI consumer sentiment index in the nation rose to 114.8 in July from a reading of 112.6 reported a month ago.
The pair is expected to find support at 0.9366, and a fall through could take it to the next support level of 0.9354. The pair is expected to find its first resistance at 0.9398, and a rise through could take it to the next resistance level of 0.9418.
Amid lack of economic releases today, investors would wait for a slew of data from Australia scheduled earlier tomorrow.
The currency pair is showing convergence with its 20 Hr moving average and is trading below its 50 Hr moving average.
Loonie Loses Ground This Morning
For the 24 hours to 23:00 GMT, the USD rose 0.47% against the CAD to close at 1.0851, after consumer confidence in the US surged to its highest level since 2007 in July.
Yesterday, a survey by the Conference Board of Canada revealed that the people in Canada were becoming more pessimistic about jobs in the nation, thereby raising concerns over the performance of the economy.
In the Asian session, at GMT0300, the pair is trading at 1.0855, with the USD trading marginally higher from yesterday’s close.
The pair is expected to find support at 1.0813, and a fall through could take it to the next support level of 1.0772. The pair is expected to find its first resistance at 1.0882, and a rise through could take it to the next resistance level of 1.0910.
Traders would await Canada’s industrial product prices and raw materials prices data, slated to be out later in the day.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
Swiss Franc Trading Above Its MA’s
For the 24 hours to 23:00 GMT, the USD rose 0.31% against the CHF and closed at 0.9069.In the Asian session, at GMT0300, the pair is trading at 0.9068, with the USD trading marginally lower from yesterday’s close.
The pair is expected to find support at 0.9043, and a fall through could take it to the next support level of 0.9018. The pair is expected to find its first resistance at 0.9084, and a rise through could take it to the next resistance level of 0.91.
Investors are likely keeping an eye on Switzerland’s UBS Consumption and KOF Leading indicators, to be released in a few hours.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
Japanese Industrial Production Fell Sharply In June
For the 24 hours to 23:00 GMT, the USD strengthened 0.25% against the JPY and closed at 102.10 following upbeat US consumer confidence data.
In the Asian session, at GMT0300, the pair is trading at 102.10, with the USD trading flat from yesterday’s close.
In the economic news, Japan’s industrial production shrank 3.3%, on a monthly basis in June, after witnessing a 0.7% rise in the previous month. Meanwhile, the small business confidence index in Japan rose to a level of 48.7 in July, compared to a reading of 47.3 in the prior month.
The pair is expected to find support at 101.91, and a fall through could take it to the next support level of 101.73. The pair is expected to find its first resistance at 102.23, and a rise through could take it to the next resistance level of 102.36.
Amid a lack of economic releases from Japan today, investors would shift their attention to the release of Japanese housing starts data, to be out tomorrow.
The currency pair is showing convergence with its 20 Hr moving average and is trading above its 50 Hr moving average.