AUD/USD: Trading the Chinese GDP Jul 2015

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, GDP continues to fall, as the Q1 reading slipped to 7.0%, compared to 7.3% in Q4 of 2014. The downswing is expected to continue, with the estimate of Q2 standing at 6.9%.

Sentiments and levels

With Greece and its creditors reaching an agreement on the latest Greek crisis, there are less hurdles for the Fed to hike in September. Key Chinese data, led by GDP, could have a significant impact on the Aussie’s fortunes this week. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7692, 0.7602, 0.7528, 0.7403, 0.7266 and 0.7113

5 Scenarios

  1. Within expectations: 6.6% to 7.2%: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 7.3% to 7.7%: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 7.7%: Given the current trend, the likelihood of a sharp expansion is low. Such an outcome would push the pair upwards, and a second resistance line might be broken as a result.
  4. Below expectations: 6.1% to 6.5%: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
  5. Well below expectations: Below 6.1%: A very poor reading would likely hurt the Australian dollar. This outcome could push the pair below a second support level.

For more on the Australian dollar, see the AUD/USDAUD/USD.

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