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 forecast.