- Euro-Zone 1Q GDP to Expand Annualized 1.0%- Fastest Pace of Growth Since 1Q 2014.
- Will Faster Growth Spark a ‘Taper Tantrum’ in Euro-Area?
For more updates, sign up for David's e-mail distribution list.
Trading the News: Euro-Zone Gross Domestic Product (GDP)
The Euro-Zone’s 1Q Gross Domestic Product (GDP) report may heighten the appeal the single currency and spur a bullish reaction in EUR/USD as market participants anticipate a faster rate of growth in the monetary union.
What’s Expected:
Click Here for the DailyFX Calendar
Why Is This Event Important:Signs of a stronger recovery may encourage the European Central Bank (ECB) to further scale back its dovish tone for monetary policy, and the Governing Council remains at risk of facing a ‘taper tantrum’ in the second-half of the year even as central bank President Mario Draghi pledges to retain the EUR 60B/monthly purchases.
Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
|---|---|---|
| Business Climate Indicator (APR) | 0.20 | 0.32 |
| Trade Balance s.a. (FEB) | 22.0B | 22.0B |
| Industrial Production s.a. (MoM) (FEB) | 0.4% | 1.1% |
The rebound in business outputs paired with the ongoing expansion in the trade surplus may generate a strong GDP print, and a marked pickup in economic activity may spur a near-term advance in EUR/USD as market participants ramp up bets for the ECB to halt its quantitative easing (QE) ahead of schedule.
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
|---|---|---|
| Retail Sales (MoM) (MAR) | -0.7% | -0.8% |
| Unemployment Rate (MAR) | 11.2% | 11.3% |
| Construction Output (MoM) (FEB) | -- | -1.8% |
However, the GDP report may fail to meet market expectations amid the ongoing slack in the real economy, and a dismal figure may dampen the near-term outlook for EUR/USD as the ECB keeps the door open to further embark on its easing cycle.
Join DailyFX on Demand for Real-Time Updates on the DailyFX Speculative Sentiment Index (SSI)!
How To Trade This Event Risk(Video)
Bullish EUR Trade: Euro-Zone GDP Expands Annualized 1.0% or Greater
- Need green, five-minute candle following a positive growth report to consider a long EUR/USD trade.
- If market reaction favors a bullish Euro trade, buy EUR/USD with two separate position.
- Set stop at the near-by swing low/reasonable distance from cost; at least 1:1 risk-to-reward.
- Move stop to entry on remaining position once initial target is met, set reasonable limit.
Bearish EUR Trade: Growth Rate Falls Short of Market Forecast
- Need red, five-minute candle to favor a short EUR/USD trade.
- Implement same strategy as the bullish euro trade, just in reverse.
Read More:
Price & Time: Euro Rebounds Sharply
COT-Position Flip in Swiss Francs
Potential Price Targets For The Release
EUR/USD Daily Chart
Chart - Created Using FXCM Marketscope 2.0
- EUR/USD remains at risk for a further advance as the bullish momentum on the Relative Strength Index (RSI) continues to take shape.
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-short EUR/USD since April 9, with the ratio currently standing at -1.88.
- Interim Resistance: 1.1520 (61.8% expansion) to 1.1532 (February high)
- Interim Support: 1.0970 (38.2% expansion) to 1.1000 (50% retracement)
Impact that Euro-Zone GDP has had on EUR/USD during the last quarter
| Period | Data Released | Estimate | Actual | Pips Change | Pips Change |
|---|---|---|---|---|---|
| 4Q A 2014 | 02/13/2014 10:00 GMT | 0.8% | 0.9% | -2 | -22 |
4Q 2014 Euro-Zone Gross Domestic Product (GDP)
The euro-area economy grew at an annualized rate of 0.9% during the last three-months of 2014 following a 0.8% expansion during the previous quarter. The better-than-expected print was driven by a Germany, with Europe’s largest economy expanding an annualized 1.4% during the same period. The extraordinary efforts taken by the European Central Bank (ECB) may continue to prop up the monetary union as the non-standard measures continue to work their way through the real economy, and the central bank may continue to embark on its easing cycle throughout 2015 in an effort to encourage a stronger recovery. The Euro struggled to hold its ground despite the better-than-expected print, with EUR/USD slipping below the 1.1400 handle and closing the North American trade at 1.1382.
--- Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
To be added to David's e-mail distribution list, please follow this link.
Trade Alongsidethe DailyFX Team on DailyFX on Demand
Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.
New to FX? Watch this Video
Join us to discuss the outlook for the major currencies on the DailyFXForums
