EUR/USD: Trading the US Preliminary GDP

EUR/USD: Trading the US Preliminary GDP

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, and 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.

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

Published on Friday at 13:30 GMT.

Indicator Background

GDP reports are released quarterly, with Preliminary GDP following the Advance GDP report. Traders should pay particular attention to this economic indicator and treat it as a market-mover.

Advance GDP for Q4,  which was released in January, posted a gain of 0.7%, close to the forecast of 0.8%. The markets are bracing for a weaker Preliminary GDP release for Q4, with an estimate of 0.4%.

Sentiments and levels

Eurozone  inflation and growth numbers remain soft  and Draghi is likely to make a move in March. The US  economy has not enjoyed a strong start to 2016, but  it seems that the worst is behind us. Assuming there is some stability in oil prices and Chinese news, the absence of safe haven flows could allow Eurozone fundamentals to play a role. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1220, 1.1140, 1.1050, 1.10, 1.0850  and  1.0780

5 Scenarios

  1. Within expectations: 0.1% to 0.7%. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.8% to 1.2%: An unexpected higher reading can send the pair  below one support  line.
  3. Well above expectations: Above 1.3%: Such an outcome could push EUR/USD downwards, and a second  support line might break as a result.
  4. Below expectations: -0.4% to 0.0%: A flat GDP figure or contraction could  push the pair higher  and break one level of resistance.
  5. Well below expectations: Below -0.4%.  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

Kenny Fisher

Kenny Fisher

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.