– U.S. 2Q GDP to Be Revised Higher from Preliminary Print
– Personal Consumption to Climb 1.9% Versus 1.8%
Trading the News: Final U.S. Gross Domestic Product
Another upward revision in the 2Q U.S. Gross Domestic Product (GDP) report may spur a more meaningful recovery in the dollar as it dampens the Fed’s scope to retain its highly accommodative policy stance.
What’s Expected:
Time of release: 09/26/2013 12:30 GMT, 8:30 EDT
Primary Pair Impact: EURUSD
Expected: 2.6%
Previous: 2.5%
DailyFX Forecast: 2.5% to 2.8%
Why Is This Event Important:
Indeed, the limited reaction to the U.S. data prints from earlier this week certainly suggests market participants are waiting on a larger fundamental catalyst to move on, and a positive development may foster a bullish setup for the reserve currency amid the ongoing discussion at the Fed to taper the asset-purchase program.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Existing Home Sales (MoM) (AUG)
-2.6%
1.7%
ISM Non-Manufacturing (JUL)
53.1
56.0
ISM Manufacturing (JUL)
52.0
55.4
The pickup in business outputs paired with the ongoing recovery in the housing market may prompted a bigger-than-expected rise in the growth rate, and the FOMC may be more inclined to implement its exit strategy next month should the data raise the outlook for growth.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Consumer Confidence (SEP)
79.9
79.7
Advance Retail Sales (AUG)
0.5%
0.2%
Change in Non-Farm Payrolls (AUG)
180K
169K
Nevertheless, the slowdown in private consumption along with the persistent slack in the labor market may drag on the growth rate, and a dismal print may prompt the Fed to further delay the taper in an effort to encourage a stronger recovery.
How To Trade This Event Risk(Video)
Join Analyst on Demand For Full Coverage of the 2Q U.S. GDP Report
Bullish USD Trade: 2Q GDP Expands 2.6% or Greater
Need red, five-minute candle following the release to consider a short EURUSD trade
If the market reaction favors a bullish dollar trade, establish short EURUSD with two position
Place stop at the near-by swing high/reasonable distance from entry with at least 1:1 risk-to-reward
Move stop to breakeven on remaining position once initial target is reached; set reasonable limit
Bearish USD Trade: Growth Rate Misses Market Forecast
Need green, five-minute candle following the release to look at a long EURUSD entry
Implement same setup as the bullish USD trade, just in opposite direction
Potential Price Targets For The Release
Chart – Created Using FXCM Marketscope 2.0
Marks Fifth Failed Attempt to Close Above the 1.3530-40 (61.8% Fib expansion)
Relative Strength Index Tracking Lower Following Bearish Break
Interim Resistance: 1.3530-40 (61.8% Fibonacci expansion)
Interim Support: 1.3360 (38.2% Fibonacci expansion) to 1.3380 Pivot
Impact that the U.S. GDP report has had on USD during the last quarter
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
1Q F 2013
06/26/2013 12:30 GMT
2.4%
1.8%
+7
-15
1Q F 2013 U.S. Gross Domestic Product
The final 1Q GDP print showed an unexpected downward revision in the growth rate as the economy expanding 1.8% during the first three-months of 2013, while Personal Consumption increased 2.6% versus an initial forecast of 3.4%. The dismal development dragged on the dollar, with the EURUSD rallying into the 1.3050 region, but the reaction was short-lived as the pair ended the day at 1.3010.
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com
Follow me on Twitter at @DavidJSong
To be added to David’s e-mail distribution list, please follow this link
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Source: Daily fx
