AUD/USD: Trading the Australian GDP Dec 2013

Australian  Gross Domestic Product (GDP) is a measurement of the production and growth of the economy, and analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast 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 quarterly, and provides an excellent indication of the health and direction of the economy. Traders should pay close attention to this key release, as an unexpected reading can quickly affect the direction of AUD/USD.

GDP has been very steady, posting identical gains of 0.6% for the past three quarters. The estimate for Q3 is slightly higher, at 0.7%. Will the indicator match or beat this prediction?

Sentiments and levels

I am bearish on AUD/USD.

The Australian dollar  remains under strong pressure  from its US counterpart.  The RBA is taking every opportunity to “talk down” the Aussie,  and this could continue to weigh on the currency, even if the Bank  opts to maintain the current rate of 2.50%. If US employment numbers are solid this week, QE taper speculation will grow, which could help the dollar, as a QE scale down is a dollar-positive event. So, the overall sentiment  is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9428, 0.9283, 0.9180, 0.9000,  0.8893 and 0.8728.

5 Scenarios

1. Within expectations: 0.5% to 0.9%: In such a case, 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 1.5%: Given the current trend, the likelihood of a sharp expansion is low. Such an outcome would push the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations: 0.0% to 0.4%: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 0.0%: A contraction in GDP would likely hurt the Australian dollar. This outcome could push the pair below a second support level.

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

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