Apr 29th 2016: Dollar Retreats as Growth Disappoints

• This morning, markets have continued to absorb the implications for the US and world economy after US GDP came in at +0.5% vs expectations of +0.8%. The dollar is now down for the second straight day.

• The move pushed the already weak USD/JPY deeper into the red, with heavy selling yesterday and this morning.

• Other yen pairs have followed suit with the EUR/JPY dropping from the sky.

• By contrast, dollar pairs have taken the opportunity to extend recent gains with the GBP/USD and EUR/GBP pushing well above the March highs.

• Oil prices have also enjoyed the state of the weak dollar with further gains yesterday.

• Coming up today we have Spanish Flash GDP at 08.00.
• Following this, we get UK net lending to individuals at 09.30. MPC member Cunliffe speaks at 13.00.
• We then have European flash CPI estimate.
• From 13.30, we switch to North America starting with Canadian GDP and RMPI.
• At the same time, we have US core PCE price index, alongside the employment cost index and personal spending.
• Chicago PMI then follows at 14.45, with revised UoM consumer sentiment at 15.00.

Trade Idea: 

• The USD/JPY’s retreat has now easily undone last week’s surge, but where now?
• In this, it may pay to observe the longer term trend which is still pointing lower, indicating more downside from here.

• A good way to play this is a LOWER trade predicting that the USD/JPY will close below 107 in 14 days time for a potential return of 133%

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