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Upward Revision to 1Q U.S. GDP to Hamper EUR/USD Rebound

Upward Revision to 1Q U.S. GDP to Hamper EUR/USD Rebound

David Song, Strategist

- U.S. GDP to Expand Annualized 0.9%- Slowest Pace of Growth Since 1Q 2015.

- Core PCE to Grow Annualized 2.1%- Highest Reading Since 1Q 2012.

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

An upward revision in the preliminary 1Q Gross Domestic Product (GDP) report may trigger near-term selloff in EUR/USD as signs of a stronger recovery provide the Federal Open Market Committee (FOMC) with greater scope to implement higher borrowing-costs.

What’s Expected:

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Why Is This Event Important:

With the U.S. economy approaching ‘full-employment,’ a faster rate of growth may encourage a greater number of Fed officials to vote for a rate-hike at the next quarterly meeting in June as the central bank sees a sustainable recovery over the policy horizon.

Expectations: Bullish Argument/Scenario

Consumer Credit (MAR) $16.000B$29.674B
Pending Home Sales (MoM) (MAR)0.5%1.4%
Existing Home Sales (MoM) (MAR)3.9%5.1%

The pickup in private-sector lending accompanied by the expansion in the housing market may prop up the growth rate, and a positive development may boost the appeal of the greenback as it puts increased pressure on the FOMC to further normalize monetary policy sooner rather than later.

Risk: Bearish Argument/Scenario

Personal Spending (MAR)0.2%0.1%
Advance Retail Sales (MoM) (MAR)0.1%-0.3%
Industrial Production (MoM) (MAR)-0.1%-0.6%

Nevertheless, slowing consumption paired with waning business outputs may drag on the GDP report, and a lackluster print may drag on the dollar as market participants push out bets for a Fed rate-hike.

How To Trade This Event Risk(Video)

Bullish USD Trade: 1Q GDP Climbs Annualized 0.9% or Greater

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

Bearish USD Trade: Growth Report Falls Short of Market Forecast

  • Need green, five-minute candle to favor a long EUR/USD trade.
  • Implement same strategy as the bullish dollar trade, just in reverse.

Potential Price Targets For The Release


EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • A break/close below the Fibonacci overlap around 1.1090 (50% retracement) to 1.1110 (50% retracement) may pave the way for a larger decline in EUR/USD as it coincides with the upward trendline carried over from December.
  • Key Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
  • Key Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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Impact the U.S. Gross Domestic Product (GDP) report has had on EUR/USD during the last release

PeriodData ReleasedEstimateActualPips ChangePips Change

4Q P


02/26/2016 12:30 GMT0.4%1.0%-41-92

Preliminary 4Q 2015 U.S. Gross Domestic Product (GDP)


The preliminary Gross Domestic Product (GDP) was unexpectedly revised higher to reflect an annualized 1.0% rate of growth, while Personal Consumption increased 2.0% during the same period amid an initial forecast for a 2.2% expansion. At the same time, the core Personal Consumption Expenditure, the Fed’s preferred gauge for inflation, increased an annualized 1.7% during the last three-months of 2015 amid projections for a 1.5% print. The dollar gained ground following the better-than-expected GDP report, with EUR/USD slipping below the 1.1000 handle to close the day at 1.0924.

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Read More:

EUR/JPY Technical Analysis: Prior Support, New Resistance

US DOLLAR Technical Analysis: A Fitting Finish To May

USD/JPY Technical Analysis: Clearly Defined Support & Resistance To Help Traders

GBP/USD Successful Re-Test of Former Resistance Line

--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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