GBP/USD: Trading the British GDP January 2012

The Gross Domestic Product (GDP) indicator measures the production and growth of the economy. Analysts consider GDP one of the most important economic indicators, thus the publication of the  British GDP can have an immediate effect on GBP/USD.

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

Published on Wednesday at 9:30 GMT.

Indicator Background

British  GDP figures are released on a quarterly basis, making the GDP indicator a very important one.  The indicator provides analysts and traders with a snapshot of economic activity and  the health of  the economy.

GDP increased last month by 0.5%, slightly better  than the market forecast. However, the markets are calling for a contraction of 0.1%, which would be the first negative reading since last January. Will the indicator prove the markets wrong, and stay in positive territory this month?

Sentiments and levels

UK economic indicators remained steady last week,  and the pound rallied against the  US dollar.  If traders  feel  that no bad economic news is good news, the  pound could continue to roll.  Thus, the overall sentiment is bullish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5815, 1.57, 1.5629, 1.55,  1.54, 1.5360  and 1.5280.

5 Scenarios

1. Within expectations: -0.4% to 0.2%: In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
2. Above expectations: 0.3% to 0.6%: A reading above expectations would be an indication  of growth in the  UK economy,  and could  push the pair  above one  resistance level.
3. Well above expectations: Above 0.6%: An unexpectedly sharp rise in GDP could propel GBP/USD upwards, and two or more resistance  lines could fall.
4. Below expectations: -0.8% to -0.5%: A reading  well into  negative territory could push GBP/USD upwards, with one support level at risk.
5. Well below expectations: Below -0.8%: A poor GDP reading would hurt the pound, and the  pair could break two  support levels or more.

For more on the pound, see the  GBP/USD forecast.