EUR/USD: Trading the Eurozone GDP

The Gross Domestic Product (GDP) indicator  is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the euro.

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

Published on Wednesday at 10:00 GMT.

Indicator Background

GDP is released quarterly, and provides an excellent indication of the health and direction of the economy in the past quarter. However, the eurozone GDP indicator tends to be moderate in impact, as both Germany and France release their GDP figures earlier.

The  indicator  recorded a small increase of 0.2%  over the previous two readings.  However, the market forecast for  February  is for a  sharp drop to  -0.4%.  Such a figure would be the first  contraction of the indicator  since 2009. Given that the market  predictions are usually within expectations, there is a strong chance that  we will see  negative numbers for  the February reading.

Sentiments and levels

Although  an agreement has been  finally hammered  out on the Greek  bailout, there is serious unrest  in Greece, and  other eurozone countries, notably  Portugal, are in deep trouble as well. There is  increasing concern about the future viability of the euro, and traders may seek safer and more secure havens for their money,  notably the US dollar.  Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3330, 1.3280, 1.3212, 1.3145, 1.3060, 1.30 and 1.2945.

5 Scenarios

1. Within expectations: -0.7% to -0.1%. In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0% to 0.3%: An unexpected reading  of zero or higher  could send  the pair  well above  one  resistance line.
3. Well above expectations: Above 0.3%: The chances of such a scenario are low. Such an outcome would push EUR/USD   upwards, and a second  resistance level might be broken as a result.
4. Below expectations: -1.1% to -0.8%:   A lower GDP figure than predicted could cause the  pair to  drop and break one support level.
5. Well below expectations:  Below -1.1%. Given the weak eurozone, such an outcome cannot be discounted. In this scenario, EUR/USD will  likely drop  and could break two or more support levels.

For more on the Euro, see the  EUR/USD forecast.