German Gross Domestic Product (GDP) is a key release and is published each quarter. GDP measures production and growth of the economy, and is considered by analysts as one the most important indicators of economic activity. 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 Thursday at 7:00 GMT.
Indicator Background
German GDP is a key economic indicator, and provides an excellent indication of the health and direction of the German economy. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of EUR/USD.
This key indicator has posted weak gains in the past two readings, with a 0.2% gain in Q3 of 2012. The markets are bracing for a decline for Q4, with an estimate of -0.5%. Will the indicator surprise the markets and remain in positive territory?
Sentiments and levels
The euro has taken its riders on quite a roller-coaster ride in 2013. The Draghi drag on the euro is likely to continue a bit more, assuming that the GDP releases fail to meet market expectations. As well, market worries about the Italian elections and the Spanish political scandal continue to weigh on the euro. However, once the euro retreats from the “currency battlefield”, it will probably not go very far – flows back into Europe are still significant. In the US, we continue to see the same old story of slow and steady / frustrating recovery, so the focus remains on Europe’s issues. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3690, 1.3588, 1.3480, 1.34, 1.3360, and 1.3290.
5 Scenarios
- Within expectations: -0.8% to -0.2%. In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: -0.1% to 0.2%: An unexpected higher reading can push the pair above one resistance line.
- Well above expectations: Above 0.2%: An surge in the reading would likely help the euro, and the pair could break a second line of resistance as a result.
- Below expectations: -1.2% to -0.9%: In this scenario, market sentiment would be negative, and EUR/USD could drop below one support level.
- Well below expectations: Below -1.2%. A sharp contraction is unlikely. In this scenario, the euro could lose ground, and the pair could fall below a second level of support.
For more on the euro, see the Euro/USD forecast.
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