GDP, UM Index Drive Stocks & USD

This morning brought a collection of market driving metrics, including Q3 U.S. GDP, the University of Michigan Consumer Sentiment Index (Dec.), and the Kansas City FED Manufacturing Activity Index (Dec.). Two out of the three came in positive, fueling a late-year bull run in stocks and the USD.

Without further adieu, here is a recap of this morning’s key U.S. metrics:

Event                                                                Actual      Projected    Previous

Annualized GDP (Q3)                                       2.1%             2.1%              2.1%  

UM Sentiment Index (Dec.)                           99.3              99.2               99.2

KC FED Manufacturing Index (Dec.)               -7                     2                   -5

The headliner of this group is Q3 GDP. The figure came in right on the money and suggests that U.S. economic growth isn’t declining as expected. Remember that “severe” economic slowdown that was on the way for late-2019? Thus far, it has yet to develop.

On the other hand, manufacturing in the midwest region has hit a rough patch. The KC FED Index showed a -7, well below projections and the previous release. Although it is only a secondary market mover, this is not great news going into the midwestern winter months.

All in all, it has been a strong day for the USD, specifically vs the Euro. Let’s take a closer look at the steep intraday downtrend in the EUR/USD.

The EUR/USD Plummets Below Daily Support

In a Live Market Update from yesterday, I broke down two daily support levels for the EUR/USD. Rates broke through the Daily SMA and Bollinger MP, pretty much ending the intermediate-term bullish trend.

Overview: The 30-minute chart above illustrates the depth of today’s bearish trend in the EUR/USD. Note the price action surrounding each of today’s key economic events; even though the USD lost ground following the UM Sentiment Index release, it quickly resumed the downtrend. Upon the negative KC FED release, the EUR/USD bucked the data and continued south.

So, what is the lesson? When a market is trending on an intraday basis, secondary news items have little impact on the direction of the prevailing trend. Today’s strength in the USD is due to Q3 GDP hitting its mark and stocks ripping higher. All else is peripheral data, at best.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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