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Trading the News: U.S. Preliminary GDP Report

What’s Expected:

Time of release: 08/26/2011 12:30 GMT, 8:30 EST

Primary Pair Impact:EURUSD

Expected: 1.1%

Previous: 1.3%

1.0% to 1.5%

Why Is This Event Important:

The preliminary U.S. GDP report is expected to show the growth rate expanding at an annualized pace of 1.1% versus an initial forecasts for a 1.3% rise, and the downward revision could weigh on the exchange as the fundamental outlook for the world’s largest economy deteriorates. A softer pace of growth may encourage the Federal Reserve to endorse its zero interest rate policy throughout the following year, and the central bank may keep the door open to conduct another round of quantitative easing as it aims to balance the risks for the economy.

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The Dollar was under pressure as the relief rally extended gains early in the week but when stocks crashed on Thursday and Friday the safe haven demand for the USD saw losses pared back. The big gainer was gold which soared towards $1900 an ounce. CPI data was as expected at 0.2% in July m/m. A big shock was the Aug Philly FED Index dropping to -30 vs. 3.2 forecast. The Euro was contained in a 1.43-1.45 range with the market focused now on the idea that Eurobonds as a solution to the Debt crisis. Hurting sentiment is Eurozone growth concerns with Q2 GDP a paltry 0.2% vs. 0.8% previously q/q. The EUR/USD is up +1.03% currently at 1.4394, after opening the week at 1.4246.

The Japanese Yen Q2 GDP was better than expected at -0.3% vs. -0.6% q/q forecast. The USD/JPY was extremely contained though with market happy to hold in a 50 pip range with dips below Y76.50 causing verbal intervention. The USD/JPY is down -0.21% currently at 76.53, after opening at 76.69.

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USD/CAD’s triangle consolidation from 1.0009 continued last week and outlook remains unchanged for the moment. Initial bias remains neutral this week and more consolidative trading would be seen. But in case of another fall, downside is expected to be contained by 0.9741 support and bring rally resumption eventually. Break of 0.9938 minor resistance will turn bias to the upside or 1.0009 first and then 61.8% retracement of 1.0851 to 0.9406 at 1.0299. Nevertheless, below 0.9741 will dampen this bullish view and turn focus back to 0.9406 instead.

In the bigger picture, a medium term bottom is possibly formed at 0.9406 on bullish convergence condition in weekly MACD. Further rise is in favor for a test on key resistance level at 1.0851 and break there will confirm completion of the down trend from 2009 high of 1.3063. However, failure to sustain above 0.9912, followed by break of 0.9741 minor support, will dampen this bullish case and argue that down trend from 1.3063 (2009 high) is still in progress for another low below 0.9406.

In the longer term picture, firstly, there is no clear indication that the long term down trend from 2002 high of 1.6196 has reversed.

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The Forex Profit Accelerator Trade Alert Software is a brand new product from Bill Poulos that provides you with 4 profitable trading systems, as well as trade alert software that alerts you to the very latest set-ups for each of these trading strategies.

It is based on the original Forex Profit Accelerator course, but it now includes this advanced software as well. This will make your life a lot easier because you no longer have to scan through the charts of the major currency pairs looking for possible set-ups for whichever system(s) you are using. You simply open up the software and check out the latest set-ups in real time as they happen.

The Forex Profit Accelerator Trade Alert Software is due to be released next month, so details of the software are still a little bit sketchy. However I can tell you about the 4 trading systems that you get.

They are all based on the daily charts and they look for profits of between 40 and 500 points.

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Japan saw a downgrade in its credit rating, but the forex market barely registered it. Indeed, the yen is gaining in forex trading on the currency market. (Likely to the chagrin of Japanese leaders.)

U.S. dollar index is down today as the currency struggles against the euro in forex trading, and as forex traders keep things rangebound ahead of Friday’s central banker symposium in Jackson Hole.

While some are hoping for some marvelous announcement from Ben Bernanke regarding QE3, others are fairly sure that such an announcement won’t come. At any rate, the yen and the euro are both higher in forex trading, despite disappointing news coming out of both areas. 

“Australia is about to enter a boom that should last decades…The Australian dollar is unlikely to go back to where it was, and manufacturing will shrink in importance to the economy, perhaps even faster than it has been.” This, according to Martin Parkinson, Treasury Minister of Australia. While 30 years from now, Mr. Parkinson’s prognosis might probe to be accurate, I’m not so sure it applies to the period 3 months from now. Here’s why:

First of all, the putative economic boom that is taking place in Australia is being driven entirely by high commodity prices and surging production and exports. Since peaking at the end of April, commodity prices have fallen mightily. You can see from the chart above that there continues to exist a tight correlation between the AUD/USD and commodities prices.

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