NZD/USD:Trading the New Zealand GDP

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The Gross Domestic Product (GDP), is an important measurement of the production and growth of the economy. Analysts consider GDP, which is released quarterly, one of the most significant indicators of economic activity.  A reading which is better than the market forecast is bullish for the New Zealand dollar.

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

Published on Wednesday at 21:45 GMT.

Indicator Background

GDP provides an important snapshot of economic activity, and as such, traders should pay particular attention to the indicator and treat it as a market-mover.

 After an outstanding reading of 0.8% in July, the GDP slumped to 0.1% in September. The markets were caught off guard, as the September forecast was for 0.5%. This marked the second consecutive reading that the market prediction was well off target. Will this trend continue for a third straight quarter?

Sentiments and levels

Manufacturing and business confidence are down, and an interest rate cut seems likely in late January, which would make the New Zealand dollar less attractive to investors. Thus, the overall sentiment is bearish on NZD/USD towards this release.

Technical levels, from top to bottom: 79, 0.7840, 0.7723, 0.7637, 0.7550, 0.7470, and 0.7370.

5 Scenarios

Within expectations: -0.1% to 0.4%. In such a scenario, NZD/USD is likely to rise within range, with a small chance of breaking higher.

Above expectations: 0.5% to 0.8%: An unexpected higher reading can send the pair well above one resistance line.

Well above expectations: Above 0.8%: The chances of such a scenario are low. Such an outcome would push NZD/USD higher, and a second resistance line might be broken as a result.

Below expectations: -0.5% to -0.2%:  A GDP figure lower than predicted could cause the pair to fall and break one level of support.

Well below expectations: Below -0.5%. A severe contraction in GDP will pull down NZD/USD, and the pair could break two or more support levels.

For more on the New Zealand dollar, see the NZD/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.