EUR/USD: Trading the German GDP August 2014

Gross Domestic Product (GDP) indicator  is a measurement of the production and growth of the economy. Analysts consider GDP 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 Wednesday at 6:00 GMT.

Indicator Background

German GDP is released quarterly, as the largest economy in the Eurozone, Germany’s numbers  are highly anticipated by the market.  German GDP readings  can have a major effect on the movement of EUR/USD.

The Eurozone is struggling, and recent German releases have failed to impress. The markets are bracing for a reading of -0.1% for GDP in Q2. This would mark the first quarter of negative growth in six quarters and could hurt the shaky euro.

Sentiments and levels

Despite cuts to interest rates in June, Eurozone growth and inflation levels have not improved. Together with accelerated preparations for a QE program and Russian sanctions, the euro is set for more losses. A lot depends on GDP numbers, and these do not look too promising. In the US, more signs of job growth and the July  JOLTS Job Openings  had its best showing since 2001. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.35, 1.3450, 1.34, 1.3325, 1.3295 and  1.32.

5 Scenarios

1. Within expectations: -0.3% to +0.1%. In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: +0.2% to +0.6%: An unexpected reading  of zero or higher  could send  the pair  well above  one  resistance line.
3. Well above expectations: Above +0.6%: 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: -0.8% to -0.4%:   A lower GDP figure than  forecast could cause the  pair to  drop and break one support level.
5. Well below expectations:  Below -0.8%. A sharp contraction in growth could push EUR/USD below a second support level.

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

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