EUR/USD: Trading the Advance US GDP

US Advance GDP is a measurement of the production and growth of the economy. Analysts consider GDP one of  the most important indicators of economic activity. So, the Advance GDP release could have a significant impact on the movement of EUR/USD. A reading which is better than the market forecast is bullish for the dollar.

Update:  US GDP 2.6%, Employment Cost Index 0.6%

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

Published on  Friday at 13:30 GMT.

Indicator Background

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.

Final GDP in Q3 looked very sharp, posting a 5.0% gain.  The markets are not expecting a repeat, but the forecast for the Q4 Advanced GDP is a strong 3.3%. Will the indicator beat the prediction?

Sentiments and levels

ECB head Mario Draghi  earned full  marks  with a massive QE program that could be open ended. The flood of euros that will hit the market  is set to  weigh heavily on the euro. Taking a long-term view, a weaker euro together with cheap oil  will  help  growth and  consequently the euro, but  we can expect falls  before the pair rises. Over in the US, the Federal Reserve signaled that rates will rise in 2015 and also noted that the economy is expanding at a “solid pace”. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.15, 1.1460, 1.1373, 1.1290, 1.12 and 1.1113.

5 Scenarios

1. Within expectations: 3.0% to 3.9%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 4.0% to 4.4%: An unexpected higher reading can send the pair  below one support  line.
3. Well above expectations: Above 4.4%: The chances of such a scenario are low. Such an outcome could push EUR/USD downwards, and a second  support line might break as a result.
4. Below expectations: 2.5% to 2.9%: A lower GDP figure than predicted could  push the pair higher  and break one level of resistance.
5. Well below expectations: Below 2.5%.  In this scenario, the EUR/USD could  move higher  and break above a second resistance line.

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

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