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USDOLLAR Risks Larger Pullback on Dismal 3Q GDP Report

USDOLLAR Risks Larger Pullback on Dismal 3Q GDP Report

David Song, Strategist

Talking Points:

- USDOLLAR Vulnerable to Dismal 3Q Gross Domestic Product (GDP) Report.

- USD/JPY Bullish Outlook Clouded by Fiscal, Monetary Policy Uncertainty.

- NZD/USD Remains at Risk for Further Losses Amid String of Lower-Highs.

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11339.81

11351.1

11320.32

0.10

51.13%

USDOLLAR Risks Larger Pullback on Dismal 3Q GDP ReportUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar Index certainly faces a risk for a larger pullback as the preliminary 3Q Gross Domestic Product (GDP) report is expected to show a downward revision in the growth rate to an annualized 3.3% from an initial forecast of 3.5%.
  • Nevertheless, we will retain a long-term bullish outlook for the USDOLLAR amid growing bets for a Fed rate hike in mid-2015; need to see faster inflation for a greater argument to normalize monetary policy sooner rather than later.
  • Continued failed attempt to push & close above 11,351 (78.6% expansion) may highlight a near-term top; former resistance around 11,120 (161.8% expansion) to 11,138 (61.8% expansion) in focus going into December.

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Release

GMT

Expected

Actual

Chicago Fed National Activity Index (OCT)

13:30

0.33

0.14

Markit Purchasing Manager Index Services (NOV P)

14:45

57.3

56.3

Markit Purchasing Manager Index Composite (NOV P)

14:45

--

56.1

Dallas Fed Manufacturing Activity (NOV)

15:30

9.0

10.5

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USD/JPY

USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Long-term USD/JPY outlook remains bullish as the Bank of Japan (BoJ) continues to embark on its easing cycle; will continue to favor topside targets as the Relative Strength Index (RSI) pushes deeper into overbought territory, but need a break of resistance around the 87 region to favor fresh highs.
  • Snap election on December 14 may spur a material shift in the USD/JPY forecast as Democratic Party of Japan (DPJ) pledges to combat excessive Yen weakness.
  • Will keep a close eye on month-end flows as the DailyFX Speculative Sentiment Index (SSI) shows retail crowd turning net-short on USD/JPY earlier this morning, with the ratio currently standing at -1.05.

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NZD/USD

NZD/USD Daily Chart
  • Will continue to look for a series of lower-highs in NZD/USD as the RSI retains the bearish momentum from back in March while the Reserve Bank of New Zealand (RBNZ) preserves the verbal intervention on kiwi.
  • Even though the Trade Balance is expected to show the deficit narrowing in October, seems as RBNZ Governor Graeme Wheeler is in no rush to normalize monetary policy.
  • Downside targets remain favored, but need a close below 0.7830 (23.6% expansion) to 0.7850 (50% retracement) for conviction/confirmation for a lower-low.

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Read More:

Price & Time: EUR/USD Rebounds Ahead of Yearly Low

EURUSD Slammed into Range Lows on Outside Week

--- Written by David Song, Currency Analyst

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

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