Trading the News: Preliminary U.S. Gross Domestic Product
The preliminary 2Q U.S. GDP report may act as a fundamental catalyst to spark a near-term rally in the U.S. dollar as we anticipate an upward revision in the growth rate.
What’s Expected:
Time of release: 08/29/2013 12:30 GMT, 8:30 EDT
Primary Pair Impact: EURUSD
Expected: 2.2%
Previous: 1.7%
DailyFX Forecast: 1.8% to 2.5%
Why Is This Event Important:
Should the world’s largest economy expand an annualized 2.2% in the second quarter, the faster rate of growth may further the Fed’s argument to taper its asset-purchase program at the September 17-18 meeting, and the FOMC may sound less dovish this time around central bank officials see a stronger recovery over the remainder of the year.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
ISM Non-Manufacturing (JUL)
53.1
56.0
ISM Manufacturing (JUL)
52.0
55.4
Non-Farm Productivity (2Q P)
0.6%
0.9%
We may see a large upward revision in the growth rate amid the pickup in business outputs, and a positive GDP report may heighten the bullish sentiment surrounding the reserve currency as the Fed looks to slowly move away from its easing cycle.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Durable Goods Orders (JUL)
-4.0%
-7.3%
Advance Retail Sales (MoM) (JUL)
0.3%
0.2%
Change in Non-Farm Payrolls (JUL)
185K
162K
Nevertheless, the slowdown in private sector consumption along with the ongoing weakness in job growth may drag on the growth rate, and a weaker-than-expected print may prompt the FOMC to retain its highly accommodative policy stance for an extended period of time as the committee aims to encourage a stronger recovery.
How To Trade This Event Risk(Video)
Bullish USD Trade: 2Q GDP expands 2.2% or greater
Need to see red, five-minute candle following the release to consider a short EURUSD entry
If market reaction favors a sell trade, establish short with two position
Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
Move stop to cost on remaining position once initial target is hit; place reasonable limit
Bearish USD Trade: Growth rate falls short of market forecast
Need green, five-minute candle to look at a long EURUSD position
Implement same strategy as the bullish USD trade, just in reverse
Potential Price Targets For The Rate Decision
Fails to maintain upward trending channel; appears to be carving top
Keep an eye on the bearish divergence in the Relative Strength Index
Soft resistance/pivot: 1.3450; confluence on Fibonacci retracements at 1.3500
Need a close below 61.8% retracement (1.3340) for larger downturn
Interim support: 1.3240 (78.6% expansion), 1.3320 (50.0% retracement)
Impact that the preliminary 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 P 2013
05/30/2013 12:30 GMT
2.5%
2.4%
+75
+95
1Q 2013 Preliminary U.S. GDP
The U.S. growth rate was revised lower, with GDP expanding 2.4% during the first three-months of the year, while personal consumption increased another 3.4% in the first quarter amid forecasts for a 3.3% print. The slower rate of growth dragged on the dollar, with the EURUSD climbing above the 1.3000 handle, and the reserve currency continued to lose ground during the North American trade as the pair ended the day at 1.3047.
— 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.
Trade Key Event Risks with DailyFX on Analyst on Demand
Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader
New to FX? Fill Out This Quick Form for a Free Tutorial
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.Learn forex trading with a free practice account and trading charts from FXCM.
Source: Daily fx
