Forex Today - GDP miss leaves forex markets struggling for direction

Market Analysis /
Greg McKenna / 30 Jul 2018

elcome to my Forex Today column where I'll give a brief wrap on the key drivers of Forex markets and throw in a chart of the day. 

As ever, feedback welcome....oh and for AUDUSD specifically you can find that in My Australia Today piece each morning on the blog. 

And, for a deeper dive into more currencies and the charts please see my daily markets video.


The US dollar didn’t get much of a lift from the 7.1% nominal and 4.1% real Q@GDP because the real number was both lower than expectations and also a lot lower number than the whisper number traders had anchored on after President Trump was reported to have been telling his mates it was going to print 4.8%.

So forex rates for the most part hardly moved day on day. So we are increasingly seeing forex pairs trapped inside their ranges or trend channels right now.

To that end EURUSD is at 1.1658 this morning stuck inside the wedge inside the range. USDJPY is at 110.93 as we all await the BoJ’s decision tomorrow. “No change” is the favourite, but “subtle tweaks” is looming at her shoulder as we race toward the finishing line of the BoJ’s decades-long monetary experiment.

Sterling is at 1.3109 and surely destined for a Brexit induced fall at some point, even if Mark Carney and his colleagues at the BoJ ratchet rates higher this week as most expect. The Aussie dollar retook 74 cents on Friday night and it’s just hovering near there at 0.7402 in very early forex trade.  The Kiwi is at 0.6795 and USDCAD is at 1.3054 consolidating a little of the recovery from last week’s big fall.


As much of a USD bull as I am, I have to note that positioning has swung very long dollars and very short many other pairs over the past couple of months even as the Greenbacks rally has essentially stalled.

That is risk to the USD. A risk that could power the bounce the Elliott Wavicians reckon may still come to 1.1960 or 1.2060 before the ultimate push of the Greenback through resistance in DXY terms as well as recent range highs/lows (depending direct or indirect). I’m not sure if we’ll get that bounce after recent price action. But long dollar positioning is the fuel that could fire that reversal if the catalyst emerges.  

Click on me, I'll expand
Click on me, I'll expand

So that leaves me a little conflicted.

We have the mess of Brexit which price action doesn’t seem to react to even though positioning suggests there is some reasonable worries. We have a clear growth advantage in the US, we have a Fed on track to continue to tighten rates, we have a US economy which is clearly on a different growth trajectory to the rest of the globe, but we have a signal from traders in US bond markets that perhaps the US CESI score in negative territory is a better indicator than the very solid Q2 growth outcome of 4.1% “real” and 7.1% nominal.

It leaves me playing the ranges and watching for levels to break as a key indicator.

That’s in the short term. Over the weekend I did my longer-term thinking and outlook and have redoubled my belief that once Euro takes out 1.15 it could fall about 10 big figures. What, or how, that might happen I have no idea. But the charts continue to suggest this is a massive head and shoulders building on the weekly.

Here’s the chart to kick off your week.

Click on me, I'll expand
Click on me, I'll expand


On the day it’s quiet here at home. Retail sales are out in Japan, consumer credit (debt) is out in the UK along with mortgage lending data. In Europe we get Euro area data for business and consumer confidence and sentiment along with inflation expectations before German inflation data for July. Pending home sales and the Dallas Fed manufacturing index is out in the US.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

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