USD/JPY:Trading the US GDP (Second Release)

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US Gross Domestic Product (GDP) is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. Thus, publication of the US GDP (Second Release) could have a significant impact on USD/GDP.  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 Thursday at 13:30 GMT.

Indicator Background

GDP is released quarterly, and provides an excellent indication of the health and direction of the economy in the past quarter. Traders should pay particular attention to this economic indicator and treat it as a market-mover.

After a strong third quarter, the initial release for Q4 was disappointing, as it showed that the US economy actually contracted by 0.1%. Looking at the details, the “blame” for this shrink in economic activity was on big cuts in defense spending by the government, as well as a squeeze in inventories.

Data received later on, lead economists to expect an upwards revision of Q4 growth from -0.1% to 0.5%.

Sentiments and levels

After the huge rises by USD/JPY and after the G-20 meetings, it seems that the pair is set for consolidation in a relatively wide range of 92-96. A relatively dovish BOJ nominee would hurt the yen, but worries about global growth serve as a reminder the yen can be a safe haven at times. In the US, the picture continues to be mixed, and growth remains very frustrating as the recovery struggles to gain traction. Thus, the overall sentiment is bearish on USD/JPY towards this release.

Technical levels, from top to bottom: 94.40, 93.84, 92.12, 91.20, 90 and 89.67.

5 Scenarios

  1. Within expectations: 0.2% to 0.8%. In such a scenario, the USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.9% to 1.2%: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 1.2%: The chances of such a scenario are low. Such an outcome could push USD/JPY upwards, and a second resistance line might be broken as a result.
  4. Below expectations: -0.2% to 0.1%: A lower GDP figure than predicted could cause the pair to fall and break one level of support.
  5. Well below expectations: In this scenario, the USD/JPY could fall and could break a second support level.

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

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.