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
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Need to see red, five-minute candle following the release to consider a short EURUSD entry
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If market reaction favors a sell trade, establish short with two position
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Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
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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
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Need green, five-minute candle to look at a long EURUSD position
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Implement same strategy as the bullish USD trade, just in reverse
Potential Price Targets For The Rate Decision
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Close below 1.3340 (61.8% retracement) adds further confirmation a top is in place
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Bearish divergence in RSI favors downside targets; prices to follow
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Soft resistance/pivot: 1.3450 (August high)
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Need a close below 61.8% retracement (1.3340) for larger downturn
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Next support area: 1.3240 (78.6% expansion) to 1.3320 (50.0% retracement)