Forex - Focus on Euro-zone GDP

Forex News and Events:

The latest FOMC decision was as expected, with no change to the Fed Funds target range and no additional purchases of Treasury. The dollar immediately strengthened following the statement before it gave up its gains just as quickly as investors remain uncertain whether previous correlations between risk-seeking and dollar weakness should persist. But the FOMC statement, at the very least, did not spark a mass exodus from the dollar. The dollar finally edged lower after the Federal Reserve painted a less gloomy outlook for the U.S. economy, an assessment that led investors to return to commodity-linked currencies. The euro was firmer as were other high-yielding currencies like the Australian and New Zealand dollars, which made impressive gains against the USD and the JPY after being sold-off aggressively in the past few sessions. The EUR rose 0.3 percent from late U.S. trade on Wednesday to $1.4227 The AUD was up 0.2 percent at 0.8352, having fallen as low as 0.8180 on Wednesday, while the kiwi advanced 0.2 percent on the day to 0.6730 up from Wednesday's trough of 0.6599. The U.S. currency's upside against the yen seems to be capped due to talk of dollar-selling by Japanese investors repatriating funds related to $27 billion in coupon payments on U.S. Treasuries due on Aug.15. In addition, $61 billion in coupon securities mature on the same day. Europe is busy today. The contraction in Euro Area GDP probably continued in 2Q, but at a much slower pace than in the prior 2 quarters. Supported by “scrapping bonuses” in several member states, private consumption probably increased in 2Q. But the impact on overall GDP probably was offset by a further fall in inventories. Capital expenditure probably continued to fall in 2Q while the contribution of net exports to GDP likely was neutral, after a large negative contribution in Q1.

Today's Key Issues (time in GMT):

08:00 EUR European Central Bank Monthly Report (AUG)
09:00 EUR Euro-Zone Gross Domestic Product s.a. (QoQ) -0.5% vs. -2.5%
09:00 EUR Euro-Zone Gross Domestic Product s.a. (YoY) -5.1% vs. -4.9%
12:30 USD Advance Retail Sales (JUL) 0.5% vs. 0.6%
12:30 USD Retail Sales Less Autos (JUL) 0.1% vs. 0.3%
12:30 USD Import Price Index (MoM) (JUL) -0.5% vs. 3.2%
12:30 USD Import Price Index (YoY) (JUL) -19.0% vs. -17.4%
12:30 USD Initial Jobless Claims (AUG 8) 540K vs. 550K
12:30 USD Continuing Claims (AUG 1) 6350K vs. 6310K
14:00 USD Business Inventories (JUN) -0.9% vs. -1.0%
22:45 NZD Retail Sales (MoM) (JUN) -0.3% vs. 0.8%
22:45 NZD Retail Sales Ex-Auto (MoM) (JUN) -0.5% vs. 1.6%
22:45 NZD Retail Sales Ex Inflation (QoQ) (2Q) 0.2% vs. -2.9%
23:30 AUD RBA Governor's Semi-Annual Parliament Testimony

The Risk Today:

EurUsd Support at 1.4005/90 proved to be solid and consequently the uptrend off the Apr low remains in play. It may continue to hold into next week and EUR/USD will broadly trade 1.41 to 1.4350 during that time. Only a break below 1.40 would suggest the top is complete and target a deeper correction to the 1.37/1.38 area.

GbpUsd Cable did not break below the important support zone between 1.6340/1.6430. While this zone continues to provide support the near-term risk is for a period of consolidation broadly between 1.64 and 1.67.

UsdJpy USDCHF is going nowhere fast and we are reluctant to read too much into the recent price action.

UsdChf USDJPY triggered downside sell signals (break below 95.30) and then recovered strongly. The snapback combined with continued oscillation around the daily cloud supports a neutral USD/JPY outlook. Having finally found demand the range is clearly defined between 95.10 and 97.80.

Resistance and Support: