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An economic growth for U.S.?

ForexZig.com October 26, 2012
us economy

An economic growth?

The preliminary GDP of the U.S. is a key event on the Forex market and is published in every quarter. GDP measures the production and growth of the economy and it is considered by analysts as one of the most important indicators of the economic activity. The preliminary GDP is the first published version of the GDP, and usually has the greatest impact on the markets. It is an essential economic indicator and provides an excellent indication of the health and the direction of the American economy. Traders should pay particular attention to the release of GDP, because as an unexpected reading could influence the direction of EURUSD. Reading that is better than the market forecast is downward for the euro.

The Preliminary GDP fell down from the fourth quarter of 2011, which is an alarming sign for the fragile U.S. economy. Markets expect a twist reading from Q3, with a forecast of 1.9 percent growth. Will this match to the market expectations, we will see today at 3:30 pm.

Markets are not satisfied by the last meeting in the EU, where it wasn’t considered even the crippling debt crisis that spread in Greece and Spain. Markets are becoming increasingly frustrated as the saga about the Spanish request for rescue goes on and on. Spain is in no hurry to ask for help, and the uncertainty about the bailout will continue to influence on the euro. In the U.S., the economy continues to produce mixed data and with no significant improvement in it, many investors will play it safe and will stay with the greenback. So, in general, the bear attitude for EURUSD in the short term remains valid.

The technical levels of the pair are: 1.3075, 1.3030, 1.3030, 1.2960, 1.29 and 1.2814.

We see five possible scenarios of this situation for EURUSD in the publication of GDP data:

1. In line with expectations: from 1.6% to 2.2%. In such a scenario, EURUSD is likely to increase within the range, with a chance to break it up.
2. Above expectations: from 2.3% to 2.6%: An unexpected higher reading can force the pair to the first level of support.
3. High above expectations: more than 2.6%: Rise in reading is likely to break the euro and as a result the pair can go below the second line of support.
4. Below expectations: from 1.2% to 1.5%: In this scenario, EURUSD could rise above the first resistance.
5. Much below expectations: less than 1.2%. A weak reading can strengthen the euro and this could push the currency pair over two or more levels of resistance.

 

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