US GDP Will Direct Markets Today

Daily Forex Fundamentals | Written by Saxo Bank | Jul 31 09 06:46 GMT |

The importance of US GDP today for markets should not be underestimated. A better than expected earnings season so far, but long term earnings growth depends on long term GDP growth Calendar Economic Data Releases Country Name Time (GMT) Expectation Prior Comment EC 09:00 Unemployment Rate 9.7% 9.5% US 12:30 GDP QoQ Annualized (2Q) -1.5% -5.5% US 12:30 Personal Consumption (2Q) -0.5% 1.4% Earnings Data Releases Country Name Time (GMT) Expectation Prior Comment BE - Belgacom 0.5580 1.4350 UK - Anglo American 1.3280 - US - Chevron 0.9240 3.1800 What's going on? Today is going to be all about the advance US GDP growth for the second quarter. The expectation is for -1.5% QoQ growth annualized from -5.5% in 1Q, but we worry that this is too optimistic given the lack of improvement in real economic indicators in the last three months (not sentiment based). In addition, GDP could also be hit by inventory reductions as companies prepare themselves for lower sales. The Treasury's auction of 7-year notes yesterday turned out to be quite successful contrary to the auctions of 2- and 5-year notes midweek. The market actually bought the notes expensively by 3bps, meaning that they paid more than the price prevailing at the time of the auction. This could, however, be due a short covering. Stocks are seen higher intraday today on optimism surrounding the US GDP out at 12:30 GMT, and positive Euro-Zone numbers will only add fuel to that fire. Brace yourselves for retreating stocks if GDP growth fails to live up to expectations. FX FX Daily stance Comment EURUSD 0/- Look into sell rally up to 1.4175 for sub-1.41, but square ahead of US GDP EURJPY 0 Expect to see a 134.0-135.0 range ahead of data. USDJPY 0/+ Buy dips down to 95.25 for a rebound to 95.85-00 resistance, stop below 94.90 GBPUSD 0/- While holding below 1.6550 risk we retrace to 1.6450. Abv sees 1.6625 AUDUSD 0 Res at 0.8300 expected to hold for a 0.8225-0.8300 trading range Equities Equities Daily stance Comment DAX 0/+ Buy at the break of 5350 targeting 5430. S/L below 5300. FTSE 0/+ Buy at break of 4625 targeting 4685. S/L below 4595. S&P500 0/+ Buy at the break of 980 targeting 994. S/L below 975. Nasdaq 0/+ Buy at the break of 1602 targeting 1622. S/L below 1590. Dow Jones 0/+ Futures Commodities Daily Stance Comment Gold 0 Buy break of 941.0 for 955.0 else trade the 930-940 range Silver 0 Rebound may stall at 13.68-70 lvl. Trade a 13.45-13.70 range Oil 0/- Rally expected to stall around 68.0 lvl. Sell there for re-test of 65.0, stop abv 69.50 FX Options FX-Options Comment EURUSD Front end vols were sold off heavily on Thursday with 1m now trading at its lowest since September and should expect spot to move in smaller ranges. 1.40-1.4150 seems to be the levels for now but a break below 1.40 should lend support the the short dates. USDJPY Vols opened offered in Asia with only back end holding up. Spot has been weaker all day be still within established ranges so do not expect gamma to be bid anytime soon. 9300 level is key and firm break will send gamma much higher. Analysis Disclosure & Disclaimer Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. 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