AUD/USD: Trading the Australian GDP Dec 2014

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. 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 00:30 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 slipped to 0.5% in Q2, marking the lowest GDP gain since Q2 in 2012. This  edged above the estimate of 0.4%.  The  estimate for Q3 stands at 0.7%.  Will the indicator meet or beat this prediction?

Sentiments and levels

The wobbly Aussie lost close to 200 points last week and could continue  to lose more ground  if this week’s key Australian data, including GDP, fail to meet expectations.  Market sentiment remains high on the US economy, which continues to outperform that of Australia. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.8750, 0.8660, 0.8550, 0.8456, 0.8316 and  0.8150.

5 Scenarios

1. Within expectations: 0.5% 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 1.3%: An unexpected higher reading can send  the pair  above one resistance line.
3. Well above expectations: Above 1.3%: 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: 0.1% to 0.4%:   A  weak GDP  reading could cause the  pair to fall and break one level of support.
5. Well below expectations:  Below 0.1%. A zero reading or contraction in GDP could see the pair drop below a second support level.

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

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