EUR/USD: Trading the German Preliminary GDP

German  Preliminary GDP  is a measurement of the production and growth of the economy and is considered one the most important economic indicators. A reading which is better than the market forecast is bullish for the euro.

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

Published on Friday at 6:00 GMT.

Indicator Background

German GDP is released  on a  quarterly basis and provides an excellent indication of the health and direction of the economy in the past quarter. Preliminary GDP is published  about 10 days prior to the Final  GDP report. The Eurozone will also publish Flash GDP on Friday, so we could see some volatility from EUR/ USD around the time of the release of these two key events.

German Final GDP for  Q4 came in at a modest 0.3%.  The markets are expecting a significant improvement from Preliminary GDP for  Q1, with an estimate of 0.6%.

Sentiments and levels

The markets are unclear as to what the ECB   and the Federal Reserve  have planned  for the near future. Even if  the ECB  refrains from  any additional  stimulus and the Fed  doesn’t raise rates in  June, the euro  has  lost its safe haven status and its impressive recovery may have ended. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1535, 1.15, 1.1460, 1.1325, 1.1140, and 1.1070.

5 Scenarios

1. Within expectations: 0.3% to 0.9%. In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.0% to 1.4%: A strong reading could push the pair  above  one  resistance line.
3. Well above expectations: Above 1.4%: The chances of such a scenario are low. Such an outcome would likely push EUR/USD   upwards, and a second  resistance level might be broken as a result.
4. Below expectations: -0.1% to 0.2%:   A lower GDP figure than predicted could cause the  pair to  drop and break one support level.
5. Well below expectations:  Below -0.1%. A very weak reading could see EUR/USD drop  and break below  two or more support levels.

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