CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Could US GDP trigger dollar rally ahead of a busy week

Article By: ,  Financial Analyst
July 28, 2017 9:06 AM

It is going to be an extremely busy week for the economic calendar next week as we head into a new a month. Key data from China, Eurozone, UK and US will dominate the agenda, not to mention New Zealand or Canada. In addition, there will be two major central bank policy decisions from the Bank of England and the Reserve Bank of Australia. On top of all this, there will be more corporate earnings to look forward, for example from Apple and HSBC. So, there will be something for everyone next week.

Today, there is the small matter of US GDP to consider. The world’s largest economy is expected to have expanded in the second quarter by an annualized rate of 2.5% compared to 1.4% in Q1. Given the recent US data weakness, there is a good possibility that GDP may also disappoint expectations. However, will it necessarily lead to a dollar sell-off? I think the markets will be content with a very small miss. BUT if it is a significant miss, then dollar will likely head lower.

USD/JPY could turn higher, US data permitting

As I have mentioned in recent days, if the dollar were to make a recovery, its best bet will be against her weaker rivals such as the Swiss franc and possibly Japanese yen given the still-dovish SNB and BOJ. The USD/CHF has already moved sharply higher in recent days and now it could be the USD/JPY’s turn. A potential clean break above the 111.85-112.15 resistance area could trigger the rally. This area has been a sturdy support zone in the past and is now acting as resistance. It is likely that liquidity is resisting above this area: buy stops from the existing sellers and those from potential buyers. If the cluster of stop orders get triggered here later on today or early next week then the USD/JPY could head towards the 114s or 115s next.

However if key support in the 110.35-110.80 area breaks then all bets would be off for the bulls, at least in the short-term anyway. In this event, a return to the bottom of the old range would then become likely. However this is not our base case.

While the USD/JPY is stuck within the abovementioned technical areas, I don’t have a strong view in terms of direction. But my gut feeling tells me the next move is likely to be higher. The good news is we will soon find out which group of market participants are in control as price will inevitably either break support or resistance. Until then, traders may take it from one level to the next, especially given the upcoming releases of high-impact macro data.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024