Thursday, July 28, 2011

US Advanced GDP (Gross Domestic Product) Release - 29 July 2011

Here is the forecast for the US Advanced GDP q/q :
8:30am (NY Time) US Advance GDP Q/Q

Forecast 1.6% Previous 1.9%

The Trade Plan
We are looking for a deviation between 0.3~0.4% from the forecasted figure of 1.6%. Therefore if we get a 2.0% on the second quarter GDP, it would be US Dollar positive. We will BUY USD/JPY. However, if we get a 1.2% release or worse, then we would be BUYING EURUSD. 

We´ll be looking to trade this release based on my Retracement Trading Method; since this is a high impact release, strong market volatility is expected immediately after the release.

We´ll be trading this release using an after-news retracement method.
The Market
According to a medium forecast of 69 economists surveyed by Bloomberg agree that today’s Adv. GDP for Q2 2011 is going to be 1.6%, which is a drop from previous 1.9% of release.
With limited job growth and rather disappointing Retail Sales figure at 0.8%, which counts as 70% of the GDP, and because this figure is the lowest sales figure since 2009, there are very little speculation that today’s GDP will surprise to the upside.

With Fed Bernanke still reiterating to maintain all options open and the recent debt ceiling debate threatening the sovereign rating of the USD, today’s GDP may provide support for the USD if we get a positive surprise, or send USD down even further into capitulation territory if we get a much worse than expected figure.

Additional Thoughts
With Adv. GDP being the first GDP release of the three, it is usually the most volatile GDP release with the highest potential of a surprise number. Because the impact of GDP on future monetary policy, this event has the potential of changing both the long-term and short-term trend of USD. It´s definitely an event worth trading.


"GDP, which is defined (from wikipedia) as "the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time." GDP number has a direct effect on the Interest rate of the currency, it is one of the news indicators that affects FOMC´s decision directly."