US Advance GDP is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. Thus, publication of US Advance GDP could have a significant impact on the movement of EUR/USD. A reading which is higher than the market forecast is bullish for the dollar.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Wednesday at 12:30 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. There are three versions of GDP. Advance GDP is the earliest release and tends to have the most impact.
The markets were disappointed with the Q1 Advance GDP. Although the US economy grew by a solid 2.5%, this was well short of the estimate of 3.1%. The estimate for Q2 is much lower, with a forecast of just 1.1%. If the reading does not meet expectations, we could see the dollar lose ground.
Sentiments and levels
We have seen some signs of recovery out of the Eurozone lately. German PMIs were positive and French and Eurozone PMIs also showed improvement. In Spain, the unemployment rate dropped for the first time in two years and GDP showed some improvement. Greece received more aid, and Portugal is struggling, but remains afloat. So things could certainly be worse on the continent, although there is plenty of room for improvement. Draghi could push the euro lower, as his press conferences seen to have become more important than the ECB rate announcements.
In the US, economic signs remain mixed. QE Tapering isn’t fully priced in, so positive US data (especially the NFP) could bolster dollar. Barring economic data which shocks the markets, we could see the pair remain fairly steady this week. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3400, 1.3350, 1.3300, 1.3255, 1.3175 and 1.3100.
5 Scenarios
- Within expectations: 0.6% to 1.6%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 1.7% to 2.3%: An unexpected higher reading can send the pair below one support line.
- Well above expectations: Above 2.3%: The chances of such a scenario are low. Such an outcome would likely push EUR/USD downwards, and a second support level might be broken as a result.
- Below expectations: -0.1% to 0.5%: A lower GDP figure than predicted could cause the pair to climb and break one level of resistance.
- Well below expectations: Below -0.1%. In this scenario, the EUR/USD would likely get a strong boost and could break a second resistance level.
For more on the Euro, see the EUR/USD forecast.
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