EUR/USD: Trading the US Advance GDP

US Advance GDP is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity, and publication of Advance GDP could have a significant impact on the movement of EUR/USD. A reading which is better than the market forecast is bullish for the dollar.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Friday at 13:30 GMT.

Indicator Background

GDP reports are released quarterly, and provide an excellent indication of the health and direction of the economy in the past quarter. Traders should pay particular attention to this economic indicator and treat it as a market-mover.

Final GDP for Q4 posted a strong gain of 2.0% in Q4, just above the estimate of 1.9%. Advance GDP for Q1 is expected to be much softer, with a forecast of 0.8%.

Sentiments and levels

The ECB remained on the sidelines as expected, and the Federal Reserve followed suit with some dovishness of its own earlier this week. This could weaken the dollar across the board, but losses could be limited, as the “risk on” mood could hurt the euro. Eurozone numbers remain unimpressive, especially inflation. This could sow the seeds for a fall in EUR/USD afterwards. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1050, 1.10, 1.0925, 1.0850, 1.0780 and 1.0710.

5 Scenarios

  1. Within expectations: 0.5% to 1.1%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 1.2% to 1.6%: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 1.6%: Such an outcome could push EUR/USD downwards, and a second support line might break as a result.
  4. Below expectations: 0.0% to 0.4%: A weak GDP reading could push the pair higher and break one level of resistance.
  5. Well below expectations: Below 0.0%. In GDP contracts, the EUR/USD could move higher and break above a second resistance line.

Original Article: Forex Crunch