Henry Liu
Former FPA Special Consultant
- Messages
- 473
We are also getting the Canadian monthly GDP release at the same time of this release, therefore I’d recommend to either trade the U.S. release or concentrate on the Canadian release, do not try to trade both of them together... Here’s the forecast for U.S. Adv. GDP:
8:30am (NY Time) US ADV GDP q/q Forecast 2.5% Previous 2.7%
ACTION: USD/JPY BUY 2.8% SELL 2.2%
The Trade Plan
Our main focus tomorrow will be on the first of three quarterly (Q2) release of U.S. GDP number (ADV). We are looking for a minimum deviation of 0.3% on the forecasted figure of 2.5%. Therefore if we get a 2.8% on the advanced 2nd quarter GDP, it would be US Dollar positive. We will BUY USD/JPY. However, if we get a 2.2% release or worse, then we would be SELLING USD/JPY.
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.
For more information on my trading methods:
Henry's News Trading Methods
The Market
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.
We should wait until both GDP data (U.S. and Canada) have been released, including their possible revisions, then trade only after we see a significant spike and actual releases hitting or surpassing our deviation. If our deviation is not hit, then we’ll stay out of the market.
With EUR/USD hitting the 1.31000 today, market is not likely to push this pair to a breakout until after this release, therefore I expect to see a tight ranged Asian and European market today.
Additional Thoughts
US is the largest economy in the world, it's GDP is made up 2/3 of Retail Sales, and a positive GDP shows resilience in the U.S. economy and a strong message that economic recovery is still live and well in the U.S. Therefore, this release will be considered as risk event by traders. Here are the scenarios:
1. Better GDP = Risk Appetite: JPY should lose strength immediately, making all JPY pairs move up (GBP/JPY, EUR/JPY, USD/JPY, AUD/JPY), and expect to see USD remaining strong against other majors.
2. Worse GDP = Risk Aversion: JPY should gain strength immediately, dragging down the USD/JPY pair. USD should also be weak across the board. If the GDP release drops down significantly, we could see flight for safety movement in the market as USD could actually gain strength on the back of demands for US treasuries. This would be an extreme case if GDP misses expectation by a huge deviation such as 1% or more.
Pre-news Consideration
Since the last revision on Q1 Final GDP was 2.7% and forecast for this Q2 Adv. GDP is at 2.5%, we are not seeing a huge contrast in numbers, pre-market sentiment should have already priced in this market sentiment.
However, judging from last 3 months of Retail Sales release, which makes up about 66% of the GDP calculation, this release is likely to be on the low side, evidenced by today's equity market which closed lower in anticipation of this release...
I'd probably stay out of the pre-news market as I believe recent market activities has already priced in this release.
DEFINITION:
“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.”
Historical data and charts on US GDP q/q.
Thanks,
8:30am (NY Time) US ADV GDP q/q Forecast 2.5% Previous 2.7%
ACTION: USD/JPY BUY 2.8% SELL 2.2%
The Trade Plan
Our main focus tomorrow will be on the first of three quarterly (Q2) release of U.S. GDP number (ADV). We are looking for a minimum deviation of 0.3% on the forecasted figure of 2.5%. Therefore if we get a 2.8% on the advanced 2nd quarter GDP, it would be US Dollar positive. We will BUY USD/JPY. However, if we get a 2.2% release or worse, then we would be SELLING USD/JPY.
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.
For more information on my trading methods:
Henry's News Trading Methods
The Market
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.
We should wait until both GDP data (U.S. and Canada) have been released, including their possible revisions, then trade only after we see a significant spike and actual releases hitting or surpassing our deviation. If our deviation is not hit, then we’ll stay out of the market.
With EUR/USD hitting the 1.31000 today, market is not likely to push this pair to a breakout until after this release, therefore I expect to see a tight ranged Asian and European market today.
Additional Thoughts
US is the largest economy in the world, it's GDP is made up 2/3 of Retail Sales, and a positive GDP shows resilience in the U.S. economy and a strong message that economic recovery is still live and well in the U.S. Therefore, this release will be considered as risk event by traders. Here are the scenarios:
1. Better GDP = Risk Appetite: JPY should lose strength immediately, making all JPY pairs move up (GBP/JPY, EUR/JPY, USD/JPY, AUD/JPY), and expect to see USD remaining strong against other majors.
2. Worse GDP = Risk Aversion: JPY should gain strength immediately, dragging down the USD/JPY pair. USD should also be weak across the board. If the GDP release drops down significantly, we could see flight for safety movement in the market as USD could actually gain strength on the back of demands for US treasuries. This would be an extreme case if GDP misses expectation by a huge deviation such as 1% or more.
Pre-news Consideration
Since the last revision on Q1 Final GDP was 2.7% and forecast for this Q2 Adv. GDP is at 2.5%, we are not seeing a huge contrast in numbers, pre-market sentiment should have already priced in this market sentiment.
However, judging from last 3 months of Retail Sales release, which makes up about 66% of the GDP calculation, this release is likely to be on the low side, evidenced by today's equity market which closed lower in anticipation of this release...
I'd probably stay out of the pre-news market as I believe recent market activities has already priced in this release.
DEFINITION:
“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.”
Historical data and charts on US GDP q/q.
Thanks,
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