EUR/USD Trading the US Advance GDP October 2015

The US Advance  Gross Domestic Product (GDP) is a key release and is published each quarter. GDP measures production and growth of the economy, and is considered by analysts as one the most important indicators of economic activity. Advance GDP  release is the first GDP version published,  and usually has the most impact on the markets.  A reading which is better than the market forecast is bearish for the euro.

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

Published on Friday at 12:30 GMT.

Indicator Background

The US Advance  GDP is a key economic indicator, and provides an excellent indication of the health and direction of the  US economy. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of EUR/USD.

Advance GDP has  been dropping since Q4 of 2011, a worrying sign about the fragile US economy, The markets are expecting a turnaround for the Q3 reading,  with  an estimate  of   a 1.9% gain.  Will the GDP  meet or beat market expectations?

Sentiments and levels

The markets were disappointed at the lacklustre EU Summit, which didn’t even discuss the crippling debt crisis engulfing Greece and Spain. The markets are becoming more frustrated as the saga over the Spanish bailout request goes on and on. Spain is really in no hurry to ask for aid, and the uncertainty over a bailout will continue to weigh on the euro. In the US, the economy continues to produce mixed data, and without significant improvement to the economy, many investors will play it safe and stick with the greenback. So, the overall sentiment  is bearish  on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3075, 1.3030, 1.3030, 1.2960, 1.29, and 1.2814.

5 Scenarios

1. Within expectations: 1.6% to 2.2%. In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 2.3% to 2.6%: An unexpected higher reading can push the pair  below one  support level.
3. Well above expectations: Above 2.6%: An surge in the reading would likely push down the euro, and the pair could break  a second line of  support as a result.
4. Below expectations: 1.2% to 1.5%: In this scenario, EUR/USD could  break  one resistance line.
5. Well below expectations: Below 1.2%. A very weak reading could bolster the euro, and the pair could push past two or more resistance lines.

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