The American economy expanded 4% QoQ in Q4, following a 33.4% increase in the previous quarter, according to data from the US Commerce Department. The reading was in line with market expectations.
Gold, oil and US stock indices reacted to this data point with a powerful rally. The dollar fell, as it had previously acted as a defensive asset. Whenever this happens, the reaction of traders to stellar macro is the opposite. When risk appetite goes up, players start buying into equities and high-risk assets, ditching the dollar and yen.
Today’s macro agenda (GMT 3)
- 11:55 Germany: unemployment report (January)
- 16:30 Canada: GPD (November), PPI (December); US: personal income and spending (December)
- 7:45 US: Chicago PMI (January)
- 18:00 US: pending house sale and Michigan consumer sentiment (January)
- 21:00 US: Baker Hughes weekly oil rig count
On Thursday, the price action came to a halt at the 67-degree angle (1.2140). In Asian trading, major currencies are in the red against the US dollar, correcting lower after yesterday's gains. Buyers were unable to use US GDP data as a launching pad for 1.2190. The price action dropped to 1.2095 in Friday morning trading. The correction vs. growth from 1.2059 to 1.2142 is 50%.
Support is at 1.2055. On January 27, the price bounced from that mark to 1.2129 on the back of weak durable goods stateside. Buying impetus has notably weakened. The bulls yielded their positions after statements from Klaas Knot and Christine Lagarde about undesired strengthening of the euro, dropping the hint to traders that they stand ready to halt the uptrend if necessary.
The price action is currently below the balance line, while euro crosses are showing mixed dynamics. Given yesterday evening’s confluence of a rally and a trendline breakout from the recent low of 1.2059, the downside risk of a retracement to 1.2063 is on the rise. Should risk appetite materialize, the euro will hold above 1.2080.
At the time of writing, S&P 500 futures are down 1%. On the last day of the week and month, sharp moves in either direction can be expected. Today’s key data point is US personal income and spending for December.