Oct 31 2008
GDP Figures take the USD Up
Big moves were seen in the Dollar yesterday due to better then expected U.S. GDP numbers. The USD gained more then 370 pips against the EUR as GDP dropped the largest percentage in 7 years. GDP contracted -0.3% in the 3rd quarter. The drop was largely contributed to U.S. consumers who cut back in spending. Consumer spending makes up roughly 70% of GDP.
Traders took the better then expected GDP numbers as a positive sign that the U.S. economy may prove more resilient in the face of the economic slowdown. GDP was forecasted to drop -0.5%, but when the numbers beat the street, traders rushed into the Dollar, sending it higher.
This is the second consecutive day the EUR/USD has seen abnormally large price changes. Two days ago, the Dollar lost over 500 pips when the Fed cut Interest Rates by half a percentage point. The unusual price movements have been in response to new market conditions stemming from the global financial crisis in that began in September with the bankruptcy of Lehman Brothers.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. The large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large gains. Look for the Dollar to increase its gains on the EUR to close the week at the 1.2760 level.
My Forex Blog
