AUD/USD: Trading the Australian GDP Jun 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 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 improved to 0.8% in Q1, its strongest gain in almost two years.  This edged  above the estimate of 0.7%. The markets are expecting the upward movement to continue, with the estimate standing at 0.9%. Will the indicator meet or beat this prediction?

Sentiments and levels

There are several factors currently weighing on the Aussie. The RBA would like nothing more than for the  currency to drop below the 0.90 level, the austerity budget will likely slow growth, and Australian numbers have not been impressive of late.  In the US, market sentiment remains positive, and if employment numbers continue to improve, the greenback will likely make gains. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9442, 0.9368, 0. 9283, 0.9175, 0.90 and 0.8893.

5 Scenarios

1. Within expectations: 0.7% to 1.1%: In such a scenario, the AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.1% 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: 0.3% to 0.6%: A  weak GDP  reading could cause the  pair to fall and break one level of support.
5. Well below expectations:  Below 0.3%: In this scenario, we could see the pair drop below a second support level.

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

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