The vital point to note in GDP is 1.9 previous V 2.0 expected and a small gap. The gap is explained as 1.9 previous trades at the 3 year average from 1.96 to 1.90. GDP is currently bounded tightly near its averages but minus the 3 year then GDP trades below all its companion averages. Above 1.96 then the forecast target becomes 2.05, 2.08, 2.21 and 2.24. Shortest term, most significant break is 2.30.
If GDP breaks today 2.43, 2.52 and 2.69, USD will skyrocket higher. If the 2.30 area breaks then GDP has a good shot to shoot higher in future quarters. What’s holding GDP from significant higher latitudes is 2.47, 2.52 and 2.69 in the longer averages. All averages lack overbought or oversold status rather they wait for the impetus for direction.
The bottom side targets are 1.77 to 1.63 and way below at 1.0. Below 1.9 and 2.0 then look out below USD.
What drove GDP last quarter was higher Personal Consumption, higher private inventory investments, higher residential fixed investments and non residential fixed investments. It appears Americans were in preparation mode for the Democrats to perform usual economic destruction upon a possible election win. Exports were down as well as federal government spending.
Interesting aspect to today’s release is the possible Trump effect, if any. The main categories to view are inventories, investments, housing and the import and export relationship. A decrease in exports lowers GDP. Higher GDP later will be the result of more exports than imports but this will reveal an insight to the overall health of the economy for future quarters. Housing in previous economic cycles was always the leader to future growth. When Trump revealed Stockholm Syndrome after the ACA failure, hopes were lost Trump and for recovery.
When the ECB went negative interest rates, the Gesell model was once Inflation began to climb as previously stated then Prices, Inflation and GDP would all rise in tandem. This in turn would naturally raise interest rates. Eueozone GDP hit 1.7, Inflation at 1.8 and lower Employment. Now the market speculates to an ECB rate hike at a current 0.6. Silvio Gesell is a must read to understand the ECB economic plan. Overall, a lower exchange rate must comport to the overall economic scheme.
EUR/USD. The big break for shorts is 1.0752 then comes 1.0684 and 1.0616. All lines aren’t making much progress to take EUR/USD higher.
The big line break above remains 1.0904. Target today is right at 1.0810 to 1.0812 then we look for low 1.0700’s upon a 1.0752 break.