US Preliminary Gross Domestic Product (GDP) is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. Thus, an unexpected reading for US GDP could affect 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 Thursday at 13:30 GMT.
Indicator Background
GDP is released quarterly, and provides 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.
In Q2, US GDP posted a respectable 1.7% gain, matching the forecast. The markets are expecting a much stronger reading for Q3, with an estimate of 2.8%. Will the indicator meet or beat this rosy prediction?
Sentiments and levels
I am bearish on EUR/USD
Despite an agreement between the Eurogroup and the IMF over Greece’s debt, the euro has lost ground against the greenback. Greece is supposed to start receiving more funds next month, but the markets are concerned about the details of the agreement. The bailout funds are linked to Greece meeting its fiscal targets, and there is a lot of skepticism in the market as to whether Athens is up to the challenge. In addition, separatist parties rode to a majority in elections in Catalonia, which could weigh on the integrity of Spain and on the euro.
In the US, recent headlines point to a protracted battle over the fiscal cliff between Democrats and Republicans. Here is all you need to know about the cliff. Thus, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3030, 1.30, 1.2960, 1.2880, 1.28 and 1.2750.
5 Scenarios
- Within expectations: 2.4% to 3.2%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 3.3% to 3.7%: An unexpected higher reading can send the pair below one support line.
- Well above expectations: Above 3.7%: Such an outcome would push EUR/USD downwards, and a second support level might be broken as a result.
- Below expectations: 1.9% to 2.3%: A lower GDP figure than predicted could cause the pair to climb and break one level of resistance.
- Well below expectations: Below 1.9%. An unexpected weak could push EUR/USD upwards and break a second resistance level.
For more on the Euro, see the EUR/USD.