AUD/USD: Trading the Chinese GDP Oct 2013

Chinese 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  higher than the market forecast is bullish for the Australian dollar.

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

Published on Friday at 2:00 GMT.

Indicator Background

Chinese GDP is released quarterly, and provides an excellent indication of the health and direction of the Chinese economy. The Australian dollar is sensitive to key Chinese data such as GDP, as China is Australia’s number one trading partner,  so an unexpected reading can have a major impact on the  direction of AUD/USD.

Chinese GDP growth is very high in comparison with the industrialized countries. However, the indicator has been falling in recent readings.  GDP in Q2 fell to 7.5%, which was short of the estimate of 7.7%.  The markets are expecting a turnaround in Q3, with an estimate of a 7.8% gain.

Sentiments and levels

The Aussie has  had a solid week and received a boost from hawkish RBA minutes. However, the  crisis in Washington is still not resolved, and risky assets like the Australian dollar  could  get hurt  if  investors opt to stick with the safe-haven US dollar.  Thus, the overall sentiment  is  neutral on AUD/USD towards this release.

Technical levels, from top to bottom: 97.51, 96.70, 95.56, 94.28,  92.83 and 91.80.

5 Scenarios

1. Within expectations: 7.6% to 8.0%: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 8.0% to 8.3%: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 8.3%: 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: 7.2% to 7.5%: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 7.2%: A very poor reading 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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