Chinese Gross Domestic Product (GDP) is a measurement of the production and growth of the economy, and analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the Australian dollar.
Here are all the details, and 5 possible outcomes for AUD/USD.
Published on Wednesday at 2:00 GMT.
Indicator Background
Chinese GDP is released quarterly, and provides an excellent indication of the health and direction of the economy. Traders should pay close attention to this key release, as China is Australia’s number one trading partner, and an unexpected reading can quickly affect the direction of AUD/USD.
Chinese GDP growth is very high in comparison with the industrialized countries. However, the indicator has fallen for two consecutive quarters, and the Q1 reading of 7.4%, which matched the forecast was the lowest in almost two years. No change is expected in the Q2 release.
Sentiments and levels
Australian numbers continue to paint a mixed picture of the economy, but the Aussie remains at high levels. Recent US data has been solid, and encouraging employment figures are increasing speculation about a rate hike, which would give a boost to the US dollar. The markets are keeping a close eye on this week’s testimony from Fed chair Janet Yellen on Capitol Hill. So, the overall sentiment is neutral on AUD/USD towards this release.
Technical levels, from top to bottom: 0.97, 0.9526, 0.9441, 0.9369, 0.9282 and 0.9175.
5 Scenarios
- Within expectations: 7.2% to 7.6%: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 7.7% to 8.0%: An unexpected higher reading can send the pair above one resistance line.
- Well above expectations: Above 8.1%: Given the current trend, the likelihood of a sharp expansion is low. Such an outcome could push the pair upwards, and a second resistance line might be broken as a result.
- Below expectations: 6.8% to 7.1%: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
- Well below expectations: Below 6.8%: A very poor reading would likely hurt the Australian dollar and could push the pair below a second support level.
For more on the Australian dollar, see the AUD/USDAUD/USD.