EUR/USD: Trading the Preliminary German GDP

German  Preliminary GDP is a key release  which is published every 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 Wednesday at  6:00 GMT.

Indicator Background

Preliminary German GDP precedes Advanced German GDP by about 10 days and tends to be the GDP release which  has the most impact on EUR/USD. This means that the Preliminary GDP release is one of the most important German economic releases and is eagerly awaited by the markets.

Preliminary GDP  posted a weak gain of 0.1% in Q1, missing the estimate of  a 0.3% gain. The  markets are anticipating  a much stronger reading in Q2, with  an estimate of 0.6%. This would be the indicator’s best showing since mid-2011. Will the indicator rebound with a solid gain this time around?

Sentiments and levels

There are positive signs out from both the Eurozone and US economies –  Germany’s economy is on the march  and  Italy is contracting less than expected. In the US, both  job openings  and the  4 week moving average of jobless claims  are  looking very strong. Continuing solid employment numbers will fuel expectations for QE tapering, possibly as early as September.

At the same time, the optimistic summer markets weigh on the dollar and limit gains for the US currency, which  has shown some broad weakness recently.  So, the overall sentiment is  neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3520, 1.3415, 1.33, 1.3175, 1.3050, and 1.3000.

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%: An unexpected higher reading can push the pair above one  resistance line.
3. Well above  expectations: Above 1.4%: A surge in the reading would likely help the euro, and the pair could break a second line of resistance as a result.
4. Below expectations: -0.2% to 0.2%: In this scenario, EUR/USD could drop below one support level.
5. Well below  expectations: Below -0.2%. A very weak reading could hurt the euro, and the pair could fall below a second level of support.

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

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