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MARKET DEVELOPMENTS – US GDP SURPASSES 4% FOR FIRST TIME SINCE Q3 2014
US equity futures are set to close the week in the green (DJIA flat, Nasdaq 100 0.6%, S&P 500 0.2%) with the bourses supported by firm earnings from the likes of Amazon. Elsewhere, US GDP for Q2 rose above 4% for the first time since Q3 2014.
USD:Buy the rumour, sell the fact. This was the price action observed in the USD index this morning with the USD notably firmer in the run up to today’s GDP report, particularly due to the fact that reports had touted a reading around 4.8%. However, the figure had printed at 4.1% below expectations of 4.2%, consequently, the Dollar pared earlier gains.
EUR: This morning participants digested the latest French GDP data for the second quarter, in which both the Q/Q and Y/Y readings underwhelmed expectations due to a series of strikes in the Euro Area’s second largest economy. This is the first published Q2 GDP estimate for a Eurozone economy and it points to downside risks for the data for the region as a whole due next week. The continued sluggishness in France also comes at a period of uncertainty marked by the global trade tensions.EURUSD continues to trade within its 1.1850-1.1580 range with no signs of a break-out.
JPY: Ahead of next week’s BoJ meeting, the Japanese Yen is trading at better levels with USDJPY below 111.00 as participants speculate that the BoJ could potentially tweak monetary policy. As Japanese bond yield took a leg higher, the BoJ once again stepped in to offer to buy an unlimited amount of 5-10yr JGBs in order to keep the yield below 0.1%.
DailyFX Economic Calendar: Friday, July 27, 2018 – North American Releases
DailyFX Webinar Calendar: Friday, July 27, 2018
IG Client Sentiment Index: USDJPY Chart of the Day
USDJPY: Data shows 57.5% of traders are net-long with the ratio of traders long to short at 1.35 to 1. The number of traders net-long is 10.3% lower than yesterday and 31.6% higher from last week, while the number of traders net-short is 9.1% lower than yesterday and 30.8% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.
Five Things Traders are Reading
- “US Dollar Holds Near Weekly Highs after US GDP Tops +4%”by Christopher Vecchio, CFA, Sr. Currency Strategist
- “US Dollar Primed for Another Leg Higher, Bond Yields Supportive” by Nick Cawley, Market Analyst
- “Upbeat U.S. GDP Report to Fuel EUR/USD Weakness”by David Song, Currency Analyst
- “S&P 500 Technical Analysis – Double Top or New Record?”by Nick Cawley, Market Analyst
- “EURUSD Price Analysis: No Sign of Range Breakout Despite Expected Strong US GDP Print” by Justin McQueen, Market Analyst
--- Written by Justin McQueen, Market Analyst