Stronger USD Recovery on Tap amid Upward Revision to 2Q GDP!

- 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%

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)

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

• 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.

 

Source: http://dld.bz/cQSjG