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DailyFX Roundtable: U.S. GDP Implications for Fed Outlook, FX Market

DailyFX Roundtable: U.S. GDP Implications for Fed Outlook, FX Market

Talking Points:

- U.S. Dollar Struggles as 2Q GDP Misses Expectations, Core PCE Slows to Annualized 0.9%.

- USD/CAD Fails to Test July-Low (1.2413) Despite Strong Canada GDP Report.

- AUD/USD Pulls Back From Fresh 2017-High Ahead of RBA Meeting.

- USD/JPY Remains Stuck in Long-Term Holding Pattern; U.S. Non-Farm Payrolls in Focus.

- GBP/USD to Face BoE ‘Super Thursday’ Event; Outlook Mired by RSI Divergence.

- GER30 Risk Further Losses as Head-and-Shoulders Formation Takes Shape.

- Sign Up and Join the DailyFX Team LIVE to Cover Major Data Prints Along with the RBA & BoE Rate Decisions.

Join DailyFX Strategists Michael Boutros,Paul Robinson and David Song to cover the 2Q U.S. GDP report along with key trade setups going into the end of July. Highlighted setups include DXY, USD/CAD, USD/JPY, EUR/USD, GBP/USD, AUD/USD, SPX500 and GER30.

USD/CAD 5-Minute Chart

USD/CAD Chart

The greenback struggles to hold its ground following the 2Q GDP report, with USD/CAD tumbling to a session low of 1.2440. Mixed data prints coming out of the U.S. economy may continue to derail expectations for three Fed rate-hikes in 2017 as the central bank struggles to achieve the 2% target for inflation. With Fed Fund Futures still highlighting a 50/50 chance for a move in December, the U.S. dollar may continue to exhibit a bearish behavior in the second-half of the year as Chair Janet Yellen warns ‘the federal funds rate would not have to rise all that much further to get to a neutral policy stance.

USD/CAD Daily Chart

USD/CAD Daily Chart

Download the DailyFX 3Q Forecasts

Keep in mind, the lack of momentum to test the monthly-low (1.2413) raises the risk for a near-term correction especially as the Relative Strength Index (RSI) appears to be breaking out of the bearish formation carried over from May. As a result, USD/CAD may consolidate going into August as the U.S. Non-Farm Payrolls (NFP) is anticipated to show the world’s largest economy adding another 180K jobs in July.

However, a slowdown in U.S. household earnings may dampen the appeal of the greenback, and market participants may ultimately put increased emphasis on Canada’s Employment report as the fresh figures are projected to show a 19.0K rise following the 45.3K expansion in June. A positive development is likely to fuel the shift in USD/CAD behavior as the Bank of Canada (BoC) alters the outlook for monetary policy, and Governor Stephen Poloz and Co. may continue to lift the benchmark interest rate over the coming months as ‘the output gap is now projected to close around the end of 2017, earlier than the Bank anticipated in its April Monetary Policy Report (MPR).

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--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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