US GDP and the Forex Market’s Behavior: A Technical Case

Today’s report from the Commerce Department showed that the US Economy, the world’s largest, expanded at a 3.5 percent annual rate in the third quarter.

In recent days and ahead of the report, the sentiment in financial markets was relatively negative as the growing pessimism about the prospect for a sustainable economic growth, especially when the central bankers and policymakers finally start to unwind their stimulus measures, cast its shadow and negatively affected the investors’ confidence.

As the charts show, the yen was rising against the dollar in that period, and it was when the de-leveraging process was generally working in other parts of the markets.

At the same time, and if you wanted to bet on a possible turnaround based on good news from the GDP report, it seems that there were some signals and opportunities. Look at the daily chart, where the USDJPY hit the 26-day moving average – the blue line - which is also the intraday low at the support line (90.22 in the 15-minutes chart).

In addition, the charts below show that the leveraging process was dominant after the GDP report, causing the dollar to depreciate against the higher-yielding currencies.