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 Advance GDP 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.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Thursday 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.
GDP in Q3 looked very sharp, posting a 4.1% gain on an annual level. This beat the earlier market expectations as well as the initial releases. The markets are expecting a weaker gain in Q4, with an estimate of 3.2%. Will the indicator repeat and beat the prediction?
Update: the Fed indeed announced a second QE tapering of $10 billion.
Sentiments and levels
There is increased talk about deflation in the Eurozone, and policymakers will have to address this if inflation indicators continue to look listless. The initial inflation numbers for Germany and the euro-zone could weigh on the pair and even trigger a negative deposit rate as early as March.
In the US, the FOMC is expected to announce a second taper of $10 billion when the Fed meets on Wednesday. Even if this is mostly priced in, the actual announcement could give the dollar a boost, as was the case when the Fed announced its first taper in December. Thus, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3832, 1.38, 1.37, 1.3650, 1.3580, and 1.3515.
5 Scenarios
- Within expectations: 3% to 3.4%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 3.5% to 4.1%: An unexpected higher reading can send the pair below one support line.
- Well above expectations: Above 4.1%: 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.
- Below expectations: 2.4% to 2.9%: A lower GDP figure than predicted could push the pair higher and break one level of resistance.
- Well below expectations: Below 2.4%. 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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