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Trading News: U.S. Gross Domestic Product (GDP) - 2Q U.S. GDP Fastest Pace of Growth Since 3Q 2014

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by , 08-27-2015 at 10:43 AM (1152 Views)
          
   
Trading the News: U.S. Gross Domestic Product (GDP)

Whatís Expected:

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Why Is This Event Important:

The Fed may stay on course to normalize monetary policy in 2015 as the central bank still anticipates a stronger recovery to materialize over the coming months, and data prints encouraging an improved outlook for growth & inflation may spur a greater dissent within the committee as the economy gets on a more sustainable path.

Expectations: Bullish Argument/Scenario

Release Expected Actual
Existing Home Sales (MoM) (JUL) -1.1% 2.0%
Advance Retail Sales (MoM) (JUL) 0.6% 0.6%
ISM Non-Manufacturing (JUL) 56.2 60.3

The expansion in service-based activity along with the pickup in household spending may generate a stronger-than-expected GDP print, and a positive development may boost interest rate expectations as Fed Chair Janet Yellen remains upbeat on the economy.

Risk: Bearish Argument/Scenario

Release Expected Actual
Building Permits (MoM) (JUL) -8.0% -16.3%
Non-Farm Payrolls (JUL) 225K 215K
Construction Spending (MoM) (JUN) 0.6% 0.1%

However, easing job growth paired with the slowdown in building activity may drag on growth rate, and signs of a slower recovery may spur a further delay of the Fedís normalization cycle as the central bank struggles to achieve the 2% target for inflation.

How To Trade This Event Risk

Bullish USD Trade: Growth Rate Expands Annualized 3.2% or Greater

  • Need to see red, five-minute candle following the GDP report to consider a short trade on EURUSD.
  • If market reaction favors a long dollar trade, sell EURUSD with two separate position.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit.

Bearish USD Trade: 2Q GDP Report Falls Short of Market Expectations

  • Need green, five-minute candle to favor a long EURUSD trade.
  • Implement same setup as the bullish dollar trade, just in reverse.

Potential Price Targets For The Release
EURUSD Daily

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  • Near-term breakout in EUR/USD keeps the focus on the topside targets as the RSI retains the bullish momentum; will retail a constructive view along as the pair holds above former-resistance around 1.1180 (23.6% retracement) to 1.1210 (61.8% retracement).
  • Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
  • Interim Support: Interim Support: 1.0790 (50% expansion) to 1.0800 (23.6% expansion)

Impact that the U.S. GDP report has had on EUR/USD during the last release

Period Data Released Estimate Actual Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
1Q P
2015
05/29/2015 12:30 GMT -0.9% -0.7% -6 +6

1Q 2015 U.S. Gross Domestic Product (GDP)

EURUSD M5: 42 pips rangeprice movement by USD - GDP news event:

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