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EUR/USD Risks Fresh Monthly Highs on Strong Euro-Zone GDP Report

EUR/USD Risks Fresh Monthly Highs on Strong Euro-Zone GDP Report

2015-08-14 05:00:00
David Song, Shuyang Ren,

- Euro-Zone 2Q GDP to Expand Annualized 1.3%- Fastest Pace of Growth Since 3Q 2011.

- Will Faster Growth Spark a ‘Taper Tantrum’ as GDP Picks Up for Three-Straight Quarters?

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Trading the News: Euro-Zone Gross Domestic Product (GDP)

The Euro-Zone’s 2Q Gross Domestic Product (GDP) report may boost the appeal of the single currency and spur fresh monthly highs in EUR/USD as the growth rate is expected to increase 1.3% following the 1.0% expansion during the first three-months of 2015.

What’s Expected:


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Why Is This Event Important:

Despite the European Central Bank’s (ECB) pledge to ‘fully implement’ its quantitative easing (QE) program, data prints pointing to a stronger recoverymay encourage the Governing Council to adopt an improved outlook for the region, and the board remains at risk of facing a ‘taper tantrum’ over the medium-term as central bank President Mario Draghi remains confident in achieving the one and only mandate for stability.

Expectations: Bullish Argument/Scenario




Business Climate Indicator (JUL)



M3 Money Supply (3M) (JUN)



Sentix Investor Confidence (JUL)



Improved confidence along with the pickup in private-sector lending may generate a strong GDP figure, and a positive development may spur a bullish reaction in the euro as it dampens the ECB’s scope to further embark on its easing cycle.

Risk: Bearish Argument/Scenario




Industrial Production s.a. (MoM) (JUN)



Retail Sales (MoM) (JUN)



Trade Balance s.a. (MAY)



However, slowing outputs paired with the ongoing weakness in private-sector spending may drag on the growth rate, and a dismal print may undermine the near-term advance in EUR/USD as it raises the risk of seeing the ECB implement more non-standard measures.

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How To Trade This Event Risk(Video)

Bullish EUR Trade: 2Q GDP Expands Annualized 1.2% 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: Euro-Zone Growth Rate Disappoints

  • 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:

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Price & Time: Dow 30 - "Death Cross" Or Just A Simple Crossover?

Potential Price Targets For The Release


EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Policy divergence between the ECB/Fed continues to foster a long-term bearish outlook for EUR/USD, but the pair may face a larger correction in the days ahead as long as the Relative Strength Index (RSI) preserves the bullish momentum carried over from the previous month.
  • DailyFX Speculative Sentiment Index (SSI)shows the retail crowd remains net-short EUR/USD since March 9, but the ratio has come off of recent extremes as it narrows to -2.05, with 33% of traders long.
  • Interim Resistance: 1.1180 (23.6% expansion) to 1.1210 (61.8% retracement)
  • Interim Support: 1.0790 (50% expansion) to 1.0800 (23.6% expansion)

Impact that Euro-Zone GDP has had on EUR/USD during the last quarter


Data Released



Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

1Q A 2015

05/13/2015 09:00 GMT





1Q 2015 Euro-Zone Gross Domestic Product (GDP)


The euro-area grew at the fastest pace in 2-years as the growth rate increased an annualized 1.0% following the 0.9% expansion during the last three-months of 2014. Despite the dovish tone held by the European Central Bank (ECB), positive developments coming out of the real economy may encourage a growing dissent within the Governing Council, and the central bank may come under pressure to scale-back its asset-purchase program as the region appears to be getting on a firmer footing. The Euro rallied following the pickup in GDP, with EUR/USD climbing above the 1.1300 handle to end the North American trade at 1.1353.

--- Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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