U.S. Session Recap – July 31, 2014

  • US ADP report: 218K vs. 230K expected and 281K previous
  • US Q2 2014 GDP up by 4.0% vs. 3.0% expected, Q1 2014’s numbers revised from -2.9% to -2.1%
  • CA raw materials price index: 1.1% vs. 0.6% expected and -0.3% previous
  • CA industrial product price index: -0.1% vs. 0.2% expected and -0.5% previous
  • Fed tapers monthly asset purchases by another $10B, now down to $25B a month

Talk about intraday reversals! Just when it looked like the Greenback bulls would bring home the bacon, Janet Yellen and her gang provided the bears some meat to chew on.

The dollar started the US forex trading session on the right side of the charts after investors shrugged off a weak ADP report and concentrated on Uncle Sam’s advanced estimate of its Q2 2014 GDP. Thanks to growth in personal consumption, exports, private inventory investment, and local government spending, growth in the US grew by a whopping 4.0% from April to June. This easily surpassed Q1 2014’s 2.1% decline and even the 3.0% growth that market players had been expecting.

Not surprisingly, the dollar rebounded across the board. An hour after the report was released EUR/USD was down 26 pips to 1.3376, GBP/USD fell by another 17 pips to 1.6910, USD/JPY jumped by 31 pips to 102.54, and USD/CHF rocketed by 23 pips to .9097. The comdolls also took hits with AUD/USD falling 20 pips to .9348, USD/CAD rising by 27 pips to 1.0889, and NZD/USD slipping by 24 pips to .8488.

Unfortunately, the bullish trend only lasted for about four hours until Janet Yellen and her gang stepped up and delivered their monetary policy decision. As expected, the Fed tapered its monthly asset purchases down to $25 billion. But what caught the investors’ attention was that while the Fed now believes that inflation has “moved somewhat closer” to its long-term target, it also thinks that “there remains significant underutilization of labor resources.” In other words, unemployment could still drag on inflation and the Fed’s interest rates.

Some traders took profits when the Fed didn’t seem hawkish enough in its statement. EUR/USD finished the session only 8 pips lower than its open price, GBP/USD limited its session losses to 17 pips, and USD/CHF had dropped from its .9104 session high to close at .9089.

Let’s see if the Asian session traders push the dollar higher. At 1:30 am GMT Australia will print its building approvals, private sector credit, and export and import price indices. Although these reports don’t usually affect the Aussie’s price action for long, they could fuel the comdoll’s intraday trends. Watch these reports closely, will ya?

See also:

London Session Recap

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