[B][U]Trading the News: Germany Gross Domestic Product[/U][/B]
[B]What is Expected[/B]
Time of release: [B]02:00 EST, 06:00 GMT 8/14/2007[/B]
Primary Pair Impact : [B]EUR/USD[/B]
Expected: 2.8%
Previous: 3.3%
[B]
How To Trade This Event Risk[/B]
In the past few weeks, a number of industrialized nation?s have already released their preliminary figures for first quarter GDP. However, nearly every one indicators has taken time to develop generous price action or has fallen flat. The most recent example was Monday morning?s Japanese figure. A sharp drop in growth (below the market?s already low outlook) generated barely a shrug from the market. This may have been to a few factors. Firstly, since only the Asian markets were online for the release, the liquidity may have been too low for a strong reaction. This would be avoided by the German release as it printed when Asian, European and London trader should all be at their desks. Alternatively, the lack of volatility may be an offshoot of recent credit concerns. A number of central banks have attempted to insure frightened investors that there is ample liquidity and a rapid transfer into cash is not necessary. Should these concerns be restored, there a modest surprise in the GDP indicator may not be enough to promise a profitable event-driven trade. As it stands, expectations are rather close to the first quarter?s realized figure, so a surprise may be possible.
Preparing for a better than expected trade is not difficult. EURUSD has been depressed for nearly a week as exogenous credit fears have cast the September monetary policy meeting in doubt. As such, the pair has formed a significant base on which traders can use as a spring board to drive spot back towards the all time highs. However, to be on the safe side, and considering the previous two quarters figures, a long trade should be supported by a number that optimally match or beat the 3.3 percent pace of the first three months. Anything less may allow the market to refocus on another wave of the credit scare, that realistically may take some time to come to pass.
Just as a bullish trade on this event risk could be a strong trade, a disappointing indicator that triggers a short EURUSD position could present considerable reward. The market bias is already tipping in favor of the bears. The pair has been pushed up against support a number of times. What?s more, the fundamentals have been developing in opposition to the euro. The recent credit upset has severely cut into rate expectations for the ECB. A disappointing growth figure would only exacerbate diehard bulls? fears.
