Late on Friday afternoon, the US dollar lost ground. It came about the 3 hours after the surprising GDP release. Despite the sharp moves, the dollar just lost its gains from previous, and no significant technical barriers were breached. Maybe next week’s Non-Farm Payrolls will make the market explode.
American Advance GDP for the second quarter came out better than expected. President Barack Obama knew what he was talking about, when he released a positive outlook less than 24 hours before the awaited release. American Gross Domestic Product dropped by 1% (annually adjusted) in the second quarter.
This initial release of the GDP was better than early expectations. Economists predicted a contraction of 1.4%. The initial response was insignificant: currency pairs jumped up and down, but didn’t go anywhere.
The big move came about 3 hours later: the dollar collapsed: EUR/USD leaped from 1.4120 to 1.4290 in short time. GBP/USD rose from 1.65 to 1.6730 before relaxing, USD/CHF fell 200 pips from 1.0860 to 1.6060 and even the Japanese Yen gained nicely against the dollar: USD/JPY fell from 95.80 to 94.50.
But wait, when you zoom out even a bit, and check out the rates just 48 hours earlier, you see that the dollar was weaker then than now. The dollar made nice gains in the past two days. The Friday Effect erased them swiftly but didn’t break any technical levels. When zooming out one last step backwards, it’s clear that no currency pair moved from the rather tight trading ranges. We’re still stuck in a range!
Next week features heavyweight economic indicators: rate decisions from 3 countries and the monthly circus: Non-Farm Payrolls. American traders will struggle with the new NFA FIFO rules, something that will also add to some nice price action. I believe, and hope, that the market will “explode” next week. I hope to see a new direction for the dollar, and the end of this range trading.
Stay tuned for weekly outlooks during the weekend.