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U.S. GDP: Levels, Ranges, Targets

U.S. GDP: Levels, Ranges, Targets

US dollar: GDP last at 1.1, 1.4 Q4 2015 and 1.8 expected contains significant hurdles to rise above, because 1.1 is far below all averages short- and long-term. As GDP continued its multi-year slide, the averages followed. The point at 1.1 is not only extraordinarily low, but the extremes in average prices are located at 0.58 and 0.36. A break at both levels then negative GDP becomes a distinct possibility.

The rescue is that 1.1 point is low, oversold and its only direction is up. The rise in GDP comes due to being oversold and not because of bright economic outlooks.

What holds GDP from further falls is that exports exceeded imports, PCE was up, state and local government spending was up and residential fixed income rose. Under a Yellen threat to raise rates, housing, mortgage rates and renovations will remain volatile to lock in current rates before any possible rise.

The 1.8 forecast derives from the 3-year average. To rise from 1.1 then, breaks must occur at 1.27 and a rough patch at 1.78 and 1.79. GDP averages lack uniformity. If 1.8 is seen then 1.78 and 1.79 become supports in future quarters, but significant headwinds exist at 2.00, 2.01, 2.10 and 2.15, so the range becomes a tight 1.79 to 2.00.

The immediate points are just the start to a long, long road and many levels to see the upper average at 2.54, 2.60 and 2.70. Total ranges if 1.8 is seen would become 1.79 to 2.54, 2.60 and 2.70.

While 1.8 is forecast, targets in my estimation are 1.59, 1.44 and lows at 0.92, 0.81 and 0.75. The averages however are significantly oversold and a rise is expected. But the upper forecast is only derived from the 1- and 2-year averages because averages from 3 to 9 years lack the status as overbought or oversold. Those averages are middle range and could easily fly higher or lower.

Failure to break 1.27 would impart an important commentary to any Yellen Fed Funds rise. Overall, 1.8 as well lacks any confidence to a rise.

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