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GBP/USD: Trading the US Advance GDP

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. The Advance GDP is the first of three versions and has the most impact on the movement of GDP/USD. A reading which is  higher than the market forecast is bullish for the pound.

Update:  GDP at +4.0%, much better than expected.  – USD jumps

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

Published on Wednesday at 12:30 GMT.

Indicator Background

US  Advance  GDP is considered one of the most important economic indicators, 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 quickly affect the direction of GBP/USD.

US  Advance  GDP  disappointed in Q1,  gaining just 0.1% according to the initial release, well below  the estimate of 1.2%. Things only got worse in the consequent revisions. According to the last revision, the US economy contracted at an annual rate of no less than 2.9%.

The markets are expecting a strong turnaround  in Q2, with an estimate of 3.1%. Will the indicator meet or beat this rosy prediction?

Sentiments and levels

British numbers have been generally  positive, but that hasn’t  been enough  to prevent the pound from shedding almost 200 points in July. US  numbers continue to point in the right direction,  led by the all-important employment indicators.  Although inflation remains weak, market sentiment is strong, and this has help the dollar post gains against  most of its rivals. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.7180, 1.7108, 1.6989, 1.6823, 1.6669, and 1.66.

5 Scenarios

  1. Within expectations:  2.8% to 3.4%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 3.5% to 3.9%: An unexpected higher reading can push the pair  below one  support line.
  3. Well above  expectations: Above 3.9%: 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: 2.3% to 2.7%: In this scenario, GBP/USD could  push above one  resistance level.
  5. Well below  expectations: Below 2.3%. A very weak reading could  lead to  the pair breaking above a second resistance line.

For more on the pound, see the GBP/USD forecast.

To follow this event live:   [do action=”calendar-event” eventid=”5f64264e-5097-4359-b60f-fb9b01229068″/]

 

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.