U.S. Dollar Tanks as GDP Report Shows Less Contraction

By: Brewer Futures Group | Sat, Aug 1, 2009
Print Email

The U.S. Dollar was hit hard on Friday. Traders aggressively sold the Dollar after the government reported a lower than estimated decline in 2nd Quarter GDP. Today's number suggests that the U.S. economy is closer to a recovery. This triggered greater demand for higher yielding, higher risk assets.

The GBP USD was the big gainer today. A spike through 1.6585 turned the main trend to up on the daily chart and triggered a breakout rally. Currently this currency pair is in a position to challenge the June high at 1.6743. In addition to the weaker U.S. GDP number, traders are anticipating a change in the Bank of England's asset buyback policy at next week's central bank meeting.

Stronger appetite for risk also triggered a breakout rally in the EUR USD. For most of this week, this currency pair had been working on a possible weekly closing price reversal. Today's rally exceeded a key retracement zone and also put this market higher for the week. The current upside momentum indicates that this market may be poised to test the high for the year at 1.4337 next week.

Weaker equity markets, and a report showing that the U.S. economy contracted less than estimated, put selling pressure on the USD JPY. This currency pair broke minor support at 94.95 to 94.72 during the day and never looked back. Downside momentum is building which could threaten the uptrend if 94.01 is violated.

The USD CAD tested the low for the week at 1.0748 and closed in a position to take it out next week. Today's strong rally in the Canadian Dollar was triggered by signs of a recovery in the U.S. economy and higher crude oil. A break next week in the equity markets could limit losses to the downside.

Increased demand for higher yielding assets helped rally the AUD USD to a new high for the year. This move is likely to continue unless the equity markets begin a sizeable correction. It all depends on whether traders decide to follow the economic data or the movement in the U.S. equity markets.

The NZD USD recovered nicely following yesterday's sell-off. Today's upside reaction was due to a better than expected U.S. GDP Report. This market is either going to break out to the upside or form a secondary lower top. It all depends on which set of fundamentals traders decide to follow. Longer-term New Zealand Dollar traders may be focusing on bearish comments from the Reserve Bank of New Zealand which suggested that the central bank is not through cutting interest rates. Shorter-term traders may be concentrating on the possible improvement in the U.S. economy leading to greater demand for higher yielding assets.

 


 

Brewer Futures Group

Author: Brewer Futures Group

www.BrewerFuturesGroup.com
Info@BrewerFuturesGroup.com

Contact us at:
Local: 312-896-3930
Toll Free: 1-800-971-2440

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Copyright © 2009-2010 Brewer Futures Group

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com