Forex Signal (Tue, August 31 2010, 9:30pm NY Time EDT) - AU GDP q/q...

[Henry Liu]

Australia GDP is a quarterly release similar to the U.S. Advanced GDP or the UK Pre-lim release, but usually there is only one release per quarter. Since this is a quarterly release, it is a high impact release that may change the short term trend of AUD. Here is the forecast:

9:30pm (NY Time) AU GDP q/q Forecast 0.9% Previous 0.5%
ACTION: AUD/USD BUY 1.2% SELL 0.6%

The Trade Plan
We’ll be looking for a devation of 0.3% or more, therefore if we get 1.2% or better, we’ll be BUYING AUD/USD; however, if we get a 0.6% or worse, we’ll probably see AUD/USD start to move downward.

We'll be trading this release using the after-news retracement method. For more information, please read:
Henry's news trading method.

The Market
We’ll focus on GDP release which is expected at 0.9%, a 0.4% increase from the previous 0.5% release. As Australia GDP has maintained on the positive side for the last 5 quarters, this release will mark the 6th consecutive positive release.

Looking at the current market, specially with the recent Retail Sales number surprising to the upside, high home price index, low unemployment, and positive trade balances, we are likely to see a better than expected release or at the very least in-line with expectation figure.

Additional Thoughts
AUDUSD is a slow moving currency and in the event that we get a strong release, we could see renewed risk appetite that would be the key focus of the session. Market will probably push AUD/USD back above the 0.9000 or 0.9100, where is the immediate resistance area.

Therefore, on a strong release, it may be best to jump in as soon as possible because we may not see much of retracement.

Pre-news Considerations
I'd be looking to BUY AUDUSD prior to this release, preferrably during US afternoon or whenever AUDUSD reaches support area (0.8900?). I believe there may be some limited demand for this currency prior to the schedule.

DEFINITION:
“GDP is 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.” In short, if you were to reduce the entire economy into a simple number, it would be the GDP.”

Historical Data & Chart From AU GDP q/q

Thanks,

 

[PipDog]

OK, I'll Bite

Henry,
On what basis do you make the recommendation to go long on the AUDUSD previous to the news? With risk aversion in play, the stock markets headed south, crude oil down 11% over the last week, and the AUDUSD strongly correlating to the stock markets...i.e., down...is this more or less a flip of the coin that the GDP will surprise to the upside, or do you have some inside info...?

I'm not saying you're wrong, as I have no clue, but it does look like with a forecast of +.9% (from a previous of +.5%), a positive surprise looks like a long shot. In fact, the last time the AUD GDP recorded a +1.2% (your current trigger) was December 2003.

Or maybe you're simply recommending to go long before the news and get out before the news??

Without any other information, I think I'd be more inclined to short before the news.

But that would be a flip of the coin.

 

[andytradings]

Well,

Let first thank you for excellent work here.

Second, I heard your advice and went long about 1 hour previous to the release.
Then I was about 27 pips up, I decided to risk and keep the long position running.
Result is, I sold in the spike and pocket 50 pips round. I had two long positions opened



Thanks...

 

[PipDog]

Have to say, "Good Call Henry!"

If you had went long mid-day there was 75 pips or so. Why did you say to go long?

 

[Vladon]

Well done.

The analysis worked perfect this time. Congratulations.