|

Currency market – GDP: Levels and forecast

GDP at -1.6 from the last quarter achieved a level just below the current absolute bottom at -1.7. GDP refers to Real and the RBNZ contains all data for interested. GDP also refers to annualized as the data was separated in years to run from the 1 to 10 year average. The data dates to 1990.

The Atlanta Fed GDP Nowcast reports GBP today at -1.2. My factor is -1.0 and -0.47.  GDP is located in a range from -1.0 to 0.06. The Atlanta Fed Nowcast is a hodge podge of convolution as much easier and faster methods exist to arrive at a better forecast.

From -1.7 and any number in negative territory or at low positive, GDP is massively oversold from the 1 year to 10 year averages. Oversold informs GDP in subsequent quarters should be positive.

On a larger range to cover 1 to 10 year averages, the overall economy is located from -1.7 to positive 3.00's. The problem with a positive GDP is many averages exist on the way to 3.0.

The 1 year average exists at 1.04, the 2 year at 1.62 and 5 year at 1.52 then comes a massive hurdle of averages at the 1.80's starting at 1.80, 1.83, 1.84, 1.85. Above 1.85 only then is considered 2.18. 2.34 and 2.40.

Since 1990, GDP experienced 11 quarters of negative growth. The current quarters of negative GDP matches the crash of 2008 as the 2 worst periods since 1990. In terms of actual numbers, the current quarters are worse than the crash of 2008 by very slim margins, -3.4 Vs -3.2. 

The crash of 2008 lasted for 5 consecutive and negative quarters while the current period factors to 4 successive quarters.

GDP contains a massive hurdle to achieve not only a positive number but a respectable level for economic growth. The first obstacle is 1.04 and this number is just the 1 year average. Only 9 more averages to go and much room for economic improvement on the policy front.

Historic GDP since 1990 normally trades from the 1 and 2 year averages to the 5 year. At -1.7, fails to register to normal averages.

Powell stated yesterday to economic problems are on the demand side. Opposite to Powell's Keynesian revelations to match Bernanke and Yellen, economic problems exist on the supply side. Demand is fairly constant while supplies represent problems  to shortages.

The 2nd problem and the most vital to lead GDP lower for longer is Democrats proposal to raise taxes. Trump, Reagan and Republicans of the 1920's demonstrated lower taxes results in  GDP skyrockets to 5 and 6% under Reagan and Trump while higher rates existed in the 1920's. 

Author

Brian Twomey

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

More from Brian Twomey
Share:

Editor's Picks

EUR/USD holds near 1.1900 ahead of US data

EUR/USD struggles to build on Monday's gains and fluctuates near 1.1900 on Tuesday. Markets turn cautious, lifting the haven demand for the US Dollar ahead of the release of key US economic data, including Retail Sales and ADP Employment Change 4-week average.

GBP/USD declines toward 1.3650 on renewed USD strength

GBP/USD stays on the back foot and declines to the 1.3650 region on Tuesday. The negative shift seen in risk mood helps the US Dollar (USD) gather strength and makes it difficult for the pair to find a foothold. The immediate focus is now on the US Retail Sales data. 

Gold stabilizes above $5,000 ahead of US data

Gold enters a consolidation phase after posting strong gains on Monday but stays above the $5,000 psychological mark and the daily swing low. US Treasury bond yields continue to edge lower on news of Chinese regulators advising financial institutions to curb holdings of US Treasuries, helping XAU/USD hold its its ground.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash (BCH) trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.