US GDP in focus amid holiday thin trading

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The final revision to the fourth quarter 2015 GDP will be released today by the US Commerce Department. US GDP growth is expected to remain unchanged at 1.0% during three months ending 2015. The second revision of the US GDP figures surprised to the upside, rising from 0.70%  in the first estimates. But many are already looking ahead to the first quarter data that will be released over the next few weeks. Estimates point that the US growth, measured in GDP might have accelerated from the 1.0% growth in Q4 2015 to 2.10% – 1.50% in the first three months of 2016. The estimates come in as the US manufacturing sector remains soft and yesterday’s durable goods orders which declined 2.80% in February as companies continue to struggle with weak overseas growth and a stronger US Dollar, which has put downside pressure on exports.

The US Federal Reserve took a dovish stance at its March 16th FOMC meeting leaving rates unchanged at 0.25% – 0.50% which led to a strong sell-off in the US Dollar. However, since the meeting, many Fed members have expressed hawkish views on rate hikes with some calling for a quarter-point increase as early as April’s FOMC meeting where no press conference is scheduled. The Dollar’s gains this week was mainly due to the Fed speak as weak economic data was broadly ignored.

The Atlanta Federal reserve’s GDP now forecast model points to a 1.40% growth in the first quarter based on the most recent set of US economic data that was released.

Atlanta Fed GDPNow Forecasts 1.4% Q1'16 US GDP Growth
Atlanta Fed GDPNow Forecasts 1.4% Q1’16 US GDP Growth

The markets are likely to stay calm in today’s trading with most of the major trading hubs closed for business. US bond and equity markets are also closed today, and trading is expected to remain thin.

Earlier this morning, Japan’s consumer inflation data showed the BoJ’s core CPI print coming in steady at 1.10%, same as it was in January. The core CPI marks a two-month print at 1.10% after consumer prices fell from 1.20% in December to 1.10% in January. The data continues to cast doubts on the BoJ’s policies with some estimating that further QQE expansion could come in as early as the BoJ’s April monetary policy meeting.

EURUSD remained flat for most of the Asian trading session after prices closed with a doji candlestick pattern yesterday following four straight days of declines since the start of this week. So far, prices have fallen to the 38.2% Fib level of the uptrend measured from the lows of 1.0825 on 2nd March and the highs of 1.1342 on 17th March. Resistance is strong at 1.130 handle. It is unlikely that prices in EURUSD will much in today’s trading.

EURUSD (1.1163): Doji near 38.2% Fib Retracement
EURUSD (1.1163): Doji near 38.2% Fib Retracement

USDJPY has also made some steady grounds after prices touched lows of 110.672 on 17th March. USDJPY is currently trading near the 113 handle, but a bullish close above the doji’s high at 112.901 is needed to confirm further upside bias in prices.

USDJPY (113): USDJPY needs to close above the doji high
USDJPY (113): USDJPY needs to close above the doji high

On a weekly basis, both EURUSD and the USDJPY are likely to close this week with an inside bar signaling a potential volatility led breakout on the horizon.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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