Home EUR/USD: Trading the US Preliminary GDP Nov 2014

EUR/USD: Trading the US Preliminary GDP Nov 2014

US Preliminary Gross Domestic Product (GDP) is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. Thus, an unexpected reading for US GDP could affect the movement of EUR/USD. A reading which is better than the market forecast is bullish for the dollar.

Update:  US GDP revised up to 3.9% –  a beat – USD up

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

Published on Thursday at 13:30 GMT.

Indicator Background

US Secondary GDP is released quarterly, and provides an excellent indication of the health and direction of the economy in the past quarter. Traders should pay particular attention to this economic indicator and treat it as a market-mover.

The estimate for Q3 GDP stands at 3.3% annualized. This is a revision of the initial estimate of 3.5% annualized. In Q2, GDP jumped 4.6% annualized, pointing to strong growth  in the US economy.

Sentiments and levels

I am bearish on EUR/USD

Monetary policy divergence continues to weigh on the euro and this is likely to continue, as the ECB is certainly determined to act decisively. Weak inflation data is  putting strong pressure on  the ECB to adopt  QE. In the US, inflation is going in the other direction and a rate hike is only a matter of time.  US numbers have been solid, and further positive data  could give  the greenback another boost. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.2570, 1.25, 1.2440, 1.2360, 1.2250 and 1.2170.

5 Scenarios

  1. Within expectations: 3.1% to 3.5%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 3.6% to 4.0%: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 4.0%: Such an outcome would push EUR/USD downwards, and a second support level might be broken as a result.
  4. Below expectations: 2.6% to 3.0%: A lower GDP figure than predicted could cause the pair to climb and break one level of resistance.
  5. Well below expectations: Below 2.6%. An unexpected weak GDP  could push EUR/USD upwards and break a second resistance level.

For more on the Euro, see the EUR/USD forecast.

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.