EUR/USD to Extend Post-ECB Losses on Upbeat U.S. GDP Report

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

2Q A

2017

07/28/2017 12:30:00 GMT

2.7%

2.6%

+9

+27

2Q 2017 U.S. Gross Domestic Product (GDP)

EUR/USD 15-Minute Chart

The U.S. economy grew an annualized 2.6% during the three-months through June, with the a deeper look at the report showing a downward revision for the 1Q print to1.2% from 1.4%. At the same time, the gauge for Personal Consumption increased 2.8% versus 1.9% during the first three-months of 2017, while the core Personal Consumption Expenditure, the Fed’s preferred gauge for inflation, slowed to 0.9% per annum from 1.8% during the same period. The U.S. dollar struggled to hold its ground following the mixed batch of data, with EUR/USD bouncing back from the 1.1715 region to end the day at 1.1749.

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How To Trade This Event Risk

Bullish USD Trade: Growth & Inflation Figures Exceed Market Forecast

  • Need a red, five-minute candle following the fresh figures to consider a short EUR/USD setup.
  • If the market reaction favors a bullish dollar trade, sell EUR/USD with two separate lots.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bearish USD Trade: Advance 3Q U.S. GDP Report Disappoints

  • Need a green, five-minute EUR/USD candle to consider a long EUR/USD setup.
  • Implement the same approach as the bullish dollar position, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily Chart

  • Downside targets are back on the radar following the European Central Bank (ECB) interest rate decision as EUR/USD snaps the monthly-opening range and trades below the 100-Day SMA (1.1673) for the first time since April.
  • A head-and-shoulders formation appears to be taking shape, with EUR/USD at risk for a larger correction as long as price and the Relative Strength Index (RSI) preserve the downward trends carried over from the summer months.
  • Next downside region of interest comes in around 1.1580 (100% expansion) followed by the Fibonacci overlap around 1.1480 (78.6% expansion) to 1.1500 (78.6%n expansion).
  • Interim Resistance: 1.2092 (2017-high) to 1.2150 (50% retracement)
  • Interim Support: 1.1390 (61.8% retracement) to 1.1400 (61.8% expansion)

EUR/USD Retail Sentiment

Click Here to Learn How Shifts in Retail Position/Sentiment Impact Trend!

Retail trader data shows 47.1% of traders are net-long EUR/USD with the ratio of traders short to long at 1.12 to 1.

The number of traders net-long is 26.4% higher than yesterday and 23.6% higher from last week, while the number of traders net-short is 9.7% lower than yesterday and 18.7% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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