Forex Trading Guide: US Preliminary GDP

Heads up! The U.S. economy is set to print its preliminary GDP reading tomorrow and markets might be in for a surprise.

You might be wondering how this could be a market-mover when it’s just the second version of the report, which was already released a few weeks back. Well, word through the forex grapevine is that a huge downward revision from the initially reported 0.1% uptick might be seen! *gasp*

In fact, several economic analysts estimate that the U.S. Q1 GDP figure might be downgraded to show a 0.6% economic contraction. *double gasp*

Business investment and equipment spending are foreseen to be revised lower for the first quarter of 2014 while public and private construction spending could also see downgrades. On the other hand, residential spending and retail sales data might be upgraded, but it remains to be seen whether the positive revisions could make up for the negative ones.

Bear in mind that Uncle Sam hasn’t seen a negative GDP reading since Q2 2009 when the economy was still dealing with the nasty aftermath of the global financial crisis. A weaker than expected reading could be very negative for the Greenback as it might revive fears of another economic recession and convince the Fed to hit the brakes on its taper plans. This might be a turning point for the U.S. dollar, which has been supported by risk aversion and relatively upbeat fundamental data so far:

US Dollar Index (4-hour Chart)

US Dollar Index (4-hour Chart)

As you can see from the 4-hour chart of USDX, the currency is stalling at an area of interest around the 81.00 mark. A larger economic contraction could lead to a massive selloff for the dollar while the lack of downward revisions could lead to a relief rally. In the unlikely event of an upward revision to the growth figure, USDX might break above the 81.00 level and lead to dollar gains across the board.

How are you planning to play the U.S. preliminary GDP release? Share your thoughts in our comment box or cast your votes in our poll below!