TheNews

Trading the News: U.S. Gross Domestic Product (GDP)

Updates to the 4Q U.S. Gross Domestic Product (GDP) report may heighten the appeal of the greenback as the fresh revision is expected to show the economy growing an annualized 2.7% versus an initial forecast of 2.5%.
Signs of stronger-than-expected activity may encourage the Federal Open Market Committee (FOMC) to deliver one rate-hike at every quarterly meeting, and Chairman Jerome Powell and Co. may continue to prepare U.S. households and businesses for higher borrowing-costs as ‘the Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.’ In turn, a batch of positive developments may foster a bullish reaction in the U.S. dollar as the central bank appears to be on course to further normalize monetary policy over the coming months.

However, a set of below-forecast prints may trigger a bearish reaction in the greenback as it drags on interest-rate expectations, with EUR/USD at risk of staging a more meaningful advance over the coming days as it breaks out of a narrow range.

EUR/USD Daily Chart

• EUR/USD pulls back from a fresh weekly-high (1.2476), but the near-term outlook remains tilted to the topside as it breaks out of a narrow range.
• Need a close above back the 1.2430 (50% expansion) to keep the 2018-high (1.2556) on the radar, with the next topside hurdle coming in around 1.2640 (61.8% expansion) to 1.2650 (38.2% retracement) followed by the 1.2860 (50% expansion) region.
• Keeping a close eye on the Relative Strength Index (RSI) as it snaps the bearish formation carried over from the previous month and appears to be extending the upward trend from late last year.

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