EUR/USD: Trading the US Preliminary GDP May 2015

US  Preliminary GDP is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity, so  publication of  Preliminary 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.

Update:US Revised GDP: -0.7%

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Friday at 12:30 GMT.

Indicator Background

All GDP reports  are released quarterly, and provide 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.

Preliminary GDP is the second  GDP release for Q1, following Advance GDP, which was released in April.  The Advance  GDP report posted a slight gain of 0.3%, well off the forecast of 1.0%.  The markets are braced for dismal news from Preliminary GDP, with an estimate of -0.8%. Will the indicator surprise the markets and remain in positive territory?

Sentiments and levels

The  sharp divergence in monetary stance between the ECB and the Fed finally set a decisive tone. This could be the long awaited last leg down for the euro, which has fallen below the 1.10 line,  and a last leg up for the greenback, and it could last for a while.  Weak data in Europe  and late signs of a  Q2  recovery  in the US also points to a clear downward direction for the struggling euro. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.12, 1.1113, 1.1050, 1.0910, 1.0815, and 1.0760.

5 Scenarios

1. Within expectations: -1.1% to -0.5%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: -0.5% to -0.1%: An unexpected higher reading can send the pair  below one support  line.
3. Well above expectations: Above -0.1%:  If the indicator hits  zero or  points to  expansion,  the dollar will likely get a boost and a second  support line might break as a result.
4. Below expectations: -1.6% to -1.2%: A  sharp contraction  could  push the pair higher  and break one level of resistance.
5. Well below expectations: Below -1.6%.  In this scenario, the EUR/USD would  likely move  higher  and could break above a second resistance line.

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

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