USD/JPY: Trading the US GDP April 25 2013

US Advance  GDP is a key release and is published each quarter. GDP measures production and growth of the economy, and is considered by analysts as one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the US dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

Actual: US GDP disappointed with a rise of only 2.5%.

Published on Friday at 12:30 GMT.

Indicator Background

The US GDP provides an excellent indication of the health and direction of the  US economy. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of USD/JPY.

Advance GDP was a disappointment in Q4, declining by 0.1%. This was the first drop in US Advance GDP since 2009.  The markets are expecting a  strong rebound in the upcoming release, with an estimate of  a 3.1% gain.  Will the indicator meet  or beat this rosy prediction?

Sentiments and levels

The G-20  didn’t criticize  Japan, and the Japanese government took this has a green light to continue its aggressive monetary  policy.  This means  that  the long term advance of the pair can be resumed. A challenge of the elusive 100 line could be successful now, after several failed attempts.  Money is slowly beginning to flow out of Japan, and this move can push the yen lower. Despite some weakness in the US, Kuroda seems to have the upper hand on Bernanke. So, the overall sentiment on USD/JPY is bullish towards this release.

Technical levels, from top to bottom: 101.14, 100, 98.90, 97.80 and 96.81.

5 Scenarios

1. Within expectations: 2.8% to 3.4%. In such a scenario, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 3.5% to 3.8%: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above 3.8%: An surge in the reading would likely help the dollar, and the pair could break a second line of resistance as a result.
4. Below expectations: 2.4% to 2.7%: In this scenario, USD/JPY could drop below one support level.
5. Well below expectations: Below 2.4%. A very weak reading could hurt the dollar, and the pair could fall below a second level of support.

For more on the yen, see the USD/JPY forecast.

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