There are three key events all coming out all from the US on Wednesday. US GDP and ADP Nonfarm Employment Change will be announced and the FOMC Statement is released. We will focus on US GDP though all three will be considered in our analysis.
|Announcement||Time (GMT)||Forecast||Previous Actual||Previous Forecast|
|US GDP (QoQ)||12:30 PM||3.0%||-2.9%||2.6%|
|ADP Nonfarm Employment Change||12:15 PM||230K||281K||200K|
US GDP is forecasted to jump to 3% after a disappointing -2.9% in 2014’s first quarter, though this is just a preliminary forecast of the figure. Last quarter was the first quarter since 2011’s Q1 in which GDP reclined and the largest since 2009’s Q2. US GDP generally remains between 0% and 5% with the exception of a few outliers. With a positive opening for Q2 we are likely to see a figure above 0%, we should have a more accurate reading next month. YoY figures have been positive consistently since 2010.
Last month’s figure came as a surprise to many investors when we observed the largest positive change since 2012. Wednesday’s forecast of 230K is higher than the average over last year which is around 200k. This announcement will provide a good estimate of government Nonfarm Payrolls (NFP) later this week. NFP is the most widely followed indicator for the US economy and holds a lot of influence on the financial markets for the long term, especially the Forex market.
Major pairs affected are the EURUSD and the GBPUSD.
The EURUSD had another sell-off day which took the pair down to create new monthly lows. Tuesday saw The CB Consumer Confidence Index overshoot forecasts yet again and with a larger margin this time, exceeding estimates by over 5 points. For Wednesday we have German CPI for the Euro and then ADP, GDP, and the FOMC Statement for the US Dollar. Given that the majority of announcements coming out this week are dominated by the US economy markets will be looking closely at them. The big number will be NFP on Friday so look to see how markets position themselves for that (i.e. how investors will act now in order to protect themselves from what they think actual NFP figures will be). Key levels for tomorrow are support at 1.34080, if tomorrows US announcements are better than expected we will likely see this level give way. There doesn’t seem to be much resistance for a move up so US figures below forecasts could potentially provide large gains for bulls.
As major news announcements are coming out of the US we see the US Dollar denominated pairs perform similarly. We saw the GBPUSD move more toward the downside around the same time as the EURUSD. We’re essentially in the same situation as the EURUSD as we look to enter trades of major US news though we do have Nationwide HPI and Manufacturing PMI on Thursday and Friday respectively for the Pound. Right now we have the GBPUSD holding at support around 1.69400 but a positive ADP will likely provide more downward momentum, enough to break this support. Again, stressing that we need to be looking to see how the markets will position themselves for Friday’s NFP announcement tomorrow’s ADP will provide a good estimate of the number.