U.S. GDP (13:30 GMT)
Economic activity in the world's largest economy is expected to rise 3.5 percent in the fourth quarter after climbing 2.6 percent the quarter prior. Indeed, a reading in line with expectations will mark the highest level since the first quarter of 2010. Expansion will likely be due to a pickup in private demand. Meanwhile, the breakdown of the release may show that auto sales extended last quarter's gain as motor vehicles posted an impressive December return after showing normal returns n October in November. Growth in equipment and software may pare some of its gains, while nonresidential and residential investments is predicted to continue its southern journey.
Not to overlook, consumer spending probably provided a boost to economic activity. Spending is a key gauge heading into the GDP report due to the fact that it accounts for almost 70 percent of the overall economic activity. Tomorrow' report trails new and pending home sales data for the month of December which showed an increase of 17.5 and 2.0 percent respectively. Both readings bode well for the U.S. as many economists have been referring to growth in the world's largest economy as a homeless recovery because the housing market stayed at depressed levels longer than expected. All in all, the recent housing data paired a better than expected GDP release may provide the dollar with a much needed correction as the currency started the new year weighed by poor fundamentals.
USDJPY Hourly Chart
Charts Created Using FXCM's Strategy Trader - Prepared by Michael Wright
USDJPY: The pair recently broke above descending trend line that remained intact since earlier this month. This level also coincides with the 100-day simple moving average. If price action can hold above this level, additional gains may be in the horizon. However, it is worth noting that our speculative sentiment index stands at 4.56and signals for losses in pair.
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Written by Michael Wright, Currency Analyst
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Michael Wright authors FX Headlines, Fundamentals vs. Technical's, Intraday Trading, Weekly Spotlight, and Forex Trading Weekly Forecast