EUR/USD: Trading the US Advance GDP

US Advance GDP is a key release and is published each quarter. Advance GDP measures production and growth of the economy, and is considered by analysts as one the most important indicators of economic activity. A reading which is higher than the market forecast is bullish for the dollar.

Update: US GDP at 1.5% – USD seems to have the upper hand

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

Published on Wednesday at 12:30 GMT.

Indicator Background

Advance GDP is the first of three versions of GDP and has the most impact on the movement of EUR/USD. Traders should pay close attention to this, as an unexpected reading could quickly affect the direction of EUR/USD.

The estimate for Advance GDP for Q3 stands at 1.5%. This is much lower than the Final GDP for Q2, which posted an excellent gain of 3.9%. This means that the third quarter is expected to post a much smaller gain than the second quarter, pointing to a weaker US economy, which could spell trouble for the US dollar.

Sentiments and levels

The euro managed to recover after Draghi’s press conference in September, but this time the euro failed to recover quickly, and this shows that the markets are taking his hints about further QE seriously and how determined the ECB is in weighing down the euro. A lackluster Eurozone economy and low inflation are likely to press the common currency lower. Even if the Fed sounds dovish about the US economy, the euro is likely to remain in trouble. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1373, 1.13, 1.1215, 1.1050, 1.0865 and 1.0810

5 Scenarios

  1. Within expectations: 1.2% to 1.8%: In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 1.9% to 2.3%: An unexpected higher reading can push the pair below one support line.
  3. Well above expectations: Above 2.3%: A surge in the reading would likely boost the dollar, and the pair could break below a second support line as a result.
  4. Below expectations: 0.7% to 1.1%: In this scenario, EUR/USD could push above one resistance level.
  5. Well below expectations: Below 0.7%. A very weak reading could lead to the pair breaking above a second resistance line.

For more on the euro, see the EUR/USD.

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