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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.

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The greenback saw mixed results versus its rival counterparts during yesterday’s trading session. The USD initially retreated from recent highs against a basket of rival currencies caused mainly by a rise in Oil prices, as well as another round of concerns over the U.S. healthcare and banking system. The USD pared losses after a report showed that US Durable Goods Orders for July rose by 1.3% causing the USD climb against its counterparts immediately after the results were published. However, despite the positive release the USD continued its decline shortly after hawkish comments several ECB executives that helped the EUR rebound from a 6-month low versus the greenback.

In recent days the USD has gained some strength and been broadly supported over the fear of a deteriorating global economy, which would lead the Central Banks in those major economies affected by the global slowdown to lower Interest Rates. In contrast, most economists expect the Federal Reserve’s next step to most likely raise Interest Rates to ease inflationary pressures.

Today will be a very active trading day for the USD, as there are a few important news announcements expected from the U.S. economy. The first major economic news event will be the Preliminary Quarterly GDP for the 2nd quarter, which is expected to rise by 0.7% from last quarter’s result. Another expected event will be the Unemployment Claims report, one of the most influential USD indicators, which is forecasted by analysts to show a decrease of 5000 jobless individuals, from 432K last week. The Natural Gas Storage announcements are not expected to cause a major impact on the USD as there are inflationary and growth implications to the results. News is expected to be positive for the greenback, as it seems that the main positive announcements will be coming from the Preliminary Quarterly GDP which should give the USD momentum.

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