AUD/USD: Trading the Australian GDP

Australian GDP is the primary  gauge of the production and growth of the economy. It is considered by analysts as one the most important indicators of economic activity, and  a reading which is higher than expected is bullish for the Australian dollar.

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

Published on Wednesday at 1:30 GMT.

Indicator Background

Australian GDP is released on a quarterly basis, and provides an excellent indication of the health and size of the Australian economy. An unexpected reading can quickly affect the movement of AUD/USD.

GDP posted a gain of 0.6% in Q4, beating the estimate of 0.5%. The markets are expecting another gain of 0.6%.  Will the indicator repeat and beat the estimate?

Sentiments and levels

In the US, a June rate hike isn’t likely, but a move in July is certainly an option. With the RBA hinting at a rate cut this summer, monetary policy favors the US dollar. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7438, 0.7334, 0.7192, 0.7105, 0.7002 and  0.6875.

5 Scenarios

1. Within expectations: 0.3% to 0.9%. In such a scenario, the AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.0% to 1.4%: An unexpected higher reading can send  the pair  above one resistance line.
3. Well above expectations: Above 1.4%: The chances of such a scenario are low. Such an outcome could push AUD/USD upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.2% to +0.2%:   A  weak reading  could push AUD/USD below one  support line.
5. Well below expectations:  Below -0.2%.  In this scenario, we could see the pair drop below a second support level.

For more on AUD/USD, see the Australian dollar forecast.