TheNews

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

The 1Q U.S. Gross Domestic Product (GDP) report may dampen the appeal of the greenback and spark a near-term advance in EUR/USD as signs of a slowing recovery weigh on interest-rate expectations.

What’s Expected:



Why Is This Event Important:

A soft growth figure may encourage the Federal Reserve to retain its current policy throughout most of 2016 amid the ongoing 9 to 1 split within the central bank, but a marked rebound in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may put increased pressure on Chair Janet Yellen and Co. to further normalize monetary policy over the coming months especially as the U.S. economy approaches ‘full-employment.’

Nevertheless, the pickup in housing accompanied by ongoing improvement in labor-market dynamics may help to boost economic activity, and a positive development may generate a bullish reaction in the U.S. dollar as it puts increased pressure on the Federal Reserve to further normalize monetary policy sooner rather than later.

How To Trade This Event Risk

Bearish USD Trade: 1Q GDP Report Warns of Slowing Recovery

• Need to see green, five-minute candle following the GDP report to consider a long trade on EURUSD.
• If market reaction favors a bearish dollar trade, buy EURUSD with two separate position.
• Set stop at the near-by swing low/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.

Bullish USD Trade: U.S. Expands Annualized 0.6% or Greater, Core PCE Rebounds

• Need red, five-minute candle to favor a short EURUSD trade.
• Implement same setup as the bearish dollar trade, just in the opposite direction.

Potential Price Targets For The Release
EURUSD Daily

• EUR/USD may continue to consolidate going into the end of the month as it remains stuck within a near-term triangle/wedge formation, but the continuation pattern may ultimately give way to a further advance in the exchange rate especially as the Relative Strength Index (RSI) largely preserves the bullish trend carried over from March 2015.
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0370 (38.2% expansion) to 1.0410 (61.8% expansion)

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