The United States GDP, released quarterly, is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity, and 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 13:00 GMT.
Indicator Background
The GDP is released about 30 days after the end of quarter, and provides an excellent indication of the health of the economy in the past quarter. Traders should pay particular attention to this economic indicator and treat it as a market-mover.
GDP increased by an impressive 2.5% in Q3 of 2011, and the markets are predicting an even better number for Q4, with an increase of 3.0%. A strong reading will boost confidence in the US economy, and if the reading can outpace this month’s prediction, the dollar will likely benefit and move higher at the expense of the Euro.
Sentiments and levels
The financial crisis in the eurozone still seems far from being resolved, which is weighing on the Euro. The economic indicators in the US are looking good, and the dollar could benefit. EUR/USD has been moving upwards, breaking the 1.30 level earlier this week. Will this upward trend continue, or will we see a correction in the markets?
Thus, the overall sentiment is neutral on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3330, 1.3280, 1.3212, 1.3145, 1.3085, 1.30 and 1.2945.
5 Scenarios
- Within expectations: 2.6% to 3.4%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 3.5% to 3.9%: An unexpected higher reading can send the pair well below one support line.
- Well above expectations: Above 3.9%: The chances of such a scenario are low. Such an outcome would push EUR/USD downwards, and a second support level might be broken as a result.
- Below expectations: 2.1% to 2.5%: A lower figure than predicted could cause the pair to climb and break one level of resistance.
- Well below expectations: Under 2.1%. A very poor reading would hurt the dollar. In this scenario, the EUR/USD will rise and could break a second resistance level.
For more on the Euro, see the EUR/USD forecast.