Forex Traders Await US Advanced GDP After Draghi's Comments

Coming Up Today:

• Advanced GDP
• University of Michigan Consumer Sentiment

After Wednesday’s worse than expected UK GDP sent the GBPUSD lower, Forex traders will be looking towards the US’s Advanced GDP figures today. Currently, the Fed seems content on holding off from applying its third round of quantitative easing even as employment levels continue to be weak (with the election around the corner, I speculated incorrectly that the Fed would be more aggressive in doing what it could to boost the economy. So far that has been a poor prediction). As such, it will be interesting to see what happens if the GDP figures are worse than expected, if it will even have an effect. On the other hand, a better than expected figure could “seal the deal” that quantitative easing is on hold for 2012. Such an event would be expected to be negative to Gold prices while boosting the USDJPY higher.

Overall, today’s US data is competing against ECB Chairman Mario Draghi’s speech yesterday, where he stated that the Euro isn’t going anywhere. The statements were a stamp of approval for the currency and has led traders to believe that the ECB will be more proactive in its involvement to stimulate the EU’s economy. The news led European and US equity prices higher while boosting the EURUSD around 200 pips higher. However, even with the optimism, the current reality of the EU’s financial crisis was highlighted today with Spanish Unemployment figures showing the country’s jobless rate at 24.6%.

Key charts to keep your eyes on

EURUSD: After yesterday’s big move the EURUSD ‘s gains hit selling pressure just above 1.2300, at its long term resistance level. Looking ahead, unless the EURUSD can trade and hold above its resistance, the longer term downward momentum could cause the EURUSD to see profit taking today.

GBPUSD: On Wednesday we mentioned that even after the UK’s poor GDP figures, the GBPUSD held above its longer term support level. As such, the appearance of demand set up a possible move higher which was materialized over the last two days. With demand stepping up, the GBPUSD looks like a breakout candidate with a possible long term move to 1.6000, if it can overtake its 1.5750 resistance.