USD/JPY: Trading the US Advance GDP Jan 2013

US Advance GDP measures production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

Published on Wednesday at 13:30 GMT.

Indicator Background

US Advance GDP is a key economic indicator, and provides an excellent indication of the health and direction of the US economy. Traders should pay particular attention to this economic indicator, as any unexpected reading could change the direction of USD/JPY.

The indicator jumped 2.0% in Q3, a marked increase from the 1.5% gain in the previous quarter. The markets are expecting a downturn for the Q4 release, with an estimate of 1.1%. Will the indicator surprise the markets with a better release than forecast?

Sentiments and levels

Now that USD/JPY has pushed above the all-important 90 line, the pair could enjoy some consolidation before moving onto the next levels. The growing talk of a currency war, especially from Angela Merkel, could temporarily scare some of the yen bears and limit future moves. In the longer term, the improving US situation and the determination of the Japanese government to stimulate exports and fight deflation will likely lead to further gains by USD/JPY. So, the overall sentiment is neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 94.70, 92.12, 91.20, 90, 89.67, and 89.10.

5 Scenarios

1. Within expectations: 0.8% to 1.4%. In such a scenario, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.5% to 1.8%: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above 1.7%: An unexpected surge in the reading could push the pair higher, and a second line of resistance might be broken as a result.
4. Below expectations: 0.4% to 0.7%: A lower GDP figure than predicted could cause the pair to climb and fall below one support level.
5. Well below expectations: Below 0.4%. A very weak reading would likely hurt the dollar, and USD/JPY could break a second level of support.

For more on the yen, see the USD/JPY..

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