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AUD/USD: Trading the Chinese GDP Jan 2016

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 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 Tuesday at 2:00 GMT.

Indicator Background

Chinese 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 China is Australia’s number one trading partner, and an unexpected reading can quickly affect the direction of AUD/USD.

Chinese GDP remains high, but slipped to 6.9% in Q3, as the indicator continues to dip lower. This beat the forecast of 6.8%. The estimate for Q4 stands at 6.9%.

Sentiments and levels

The  slowdown in China and weak US figures  continue  to weaken  the Aussie, which is trading at multi-year lows. The Fed may delay the next hike, but the US economy is outperforming that of Australia, putting pressure on the Aussie. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.71, 0.70, 0.6899, 0.6775,  0.6680 and 0.6532.

5 Scenarios

  1. Within expectations: 6.6% to 7.3%: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 7.4% to 7.8%: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 7.8%: 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: 6.1% to 6.5%: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
  5. Well below expectations: Below 6.1%: A   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.

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.