USD/JPY: Trading the US Final GDP

US Preliminary Gross Domestic Product (GDP) measures production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the dollar.

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

Published on Friday at 12:30 GMT.

Indicator Background

US  Final GDP is a key economic indicator, and provides an excellent indication of the health and direction of the US economy. Traders should pay particular attention to this economic indicator, as any unexpected reading could change the direction of USD/JPY.

Preliminary GDP,  which was the previous GDP report,  jumped 3.7%  in Q2, an excellent reading. The markets are expecting a confirmation of that  3.7% rise in the  Final GDP  report. Will the indicator match or  beat this rosy prediction?

Sentiments and levels

The Fed remained on the sidelines yet again, leaving rates untouched as the Fed is still not convinced that US economic growth warrants a rise in rates. The yen  responded by  gaining ground against the dollar, and is trading below the symbolic 120 line. So, the overall sentiment is  bearish on USD/JPY towards this release.

Technical levels, from top to bottom: 123.00, 121.50, 120.40, 118.50, 116.90, and 115.90.

5 Scenarios

1. Within expectations: 3.3% to 4.1%. In such a scenario, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 4.2% to 4.6%: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above 4.6%: A surge in  GDP would likely push the pair higher, and a second line of resistance might be broken as a result.
4. Below expectations: 2.8% to 3.2%: A lower GDP figure than predicted could cause the pair to fall below one support level.
5. Well below expectations: Below 2.8%. A weak reading could hurt the dollar, and USD/JPY could break a second level of support.

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

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