EUR/USD: Trading the US first GDP July 2015

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Gross Domestic Product (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 the US Advance GDP often has a significant impact on 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 Tuesday at 12:30 GMT.

Indicator Background

Advance 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.

Final GDP in Q1 posted a slight decline of 0.2%, matching the forecast. The markets are expecting much better news for Q2, with the estimate for Advance GDP standing at 2.6%. Will the estimate meet or match this rosy prediction?

Sentiments and levels

The Greek deal appears to be holding, but many wounds were left open and they will be hard to heal. There are also lots of questions left, most importantly about debt restructuring which the IMF supports. In addition, it is clear that the ECB continues hitting the QE pedal to the floor. In the US, the economy showed some strength last week, and all eyes will be on the upcoming Fed policy statement. Any hints about a September rate hike could send the greenback higher. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1290, 1.1190, 1.1113, 1.1050, 1.0910 and 1.0865.

5 Scenarios

  1. Within expectations: 2.3% to 2.9%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 3.0% to 3.3%: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 3.4%: The chances of such a scenario are low. Such an outcome would push EUR/USD downwards, and a second support level might be broken as a result.
  4. Below expectations: 1.9% to 2.2%:  A lower GDP figure than predicted could cause the pair to climb and break one level of resistance.
  5. Well below expectations: Under 1.9%. In this scenario, the EUR/USD would likely rise and could break a second resistance level.

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

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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