When is the US GDP report and how could it affect EUR/USD?

US Q4 GDP Overview

Thursday's economic docket highlights the release of the Advance fourth-quarter US GDP report, or the first estimate, scheduled at 12:30 GMT. Growth in the world's largest economy is expected to have accelerated to a 5.5% annualized pace during the October-December period, up sharply from 2.3% recorded in the third quarter. Although backwards-looking, the report will provide an insight into how much effect the current wave of Omicron COVID-19 variant had on the US economy.

As Yohay Elam, FXStreet's own Analyst explains: “The US economy is set to complete an impressive recovery in 2021 on a high note. The Delta COVID-19 variant held back America's expansion in the third quarter, and the bounce-back was robust in almost all of the quarter. Omicron came in late, and had a negative impact in December, as retail sales data showed for the final month of 2021.”

How Could it Affect EUR/USD?

Heading into the key release, the US dollar shot to the highest level since July 2020 and remained well supported by the fact that the Fed reaffirmed expectations for an eventual lift-off in March. A stronger-than-expected reading will further fuel speculations about a faster policy tightening cycle and provide an additional boost to the greenback. Conversely, any disappointment is more likely to be overshadowed by rising geopolitical tensions between Russia and Ukraine. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside.

Meanwhile, Eren Sengezer, Editor FXStreet, offered a brief technical outlook for the major: “EUR/USD is trading within a touching distance of the 1.1200 psychological level. In case this support turns into resistance, the pair could face additional bearish pressure and touch its weakest level in 18 months near 1.1180. Below that level, 1.1170 (static support from Jul. 2020) aligns as the next support before sellers can target 1.1100 (psychological level).”

Eren further outlined important technical levels to trade the pair: “1.1250 (static level, former support) now acts as the first technical resistance ahead of 1.1270 (static level, former support) and 1.1300 (psychological level). With the Relative Strength Index (RSI) indicator on the four-hour chart showing extremely oversold conditions below 30, a technical correction could be witnessed in the short term but the bearish bias should stay intact unless the pair reclaims 1.1300.”

Key Notes

   •  US Fourth Quarter GDP Preview: What have you done for me lately?

   •  US GDP Preview: Inflation component could steal the show, boost dollar, already buoyed by Russia

   •  EUR/USD Forecast: Sellers eye fresh 18-month lows below 1.1190

About US GDP

The Gross Domestic Product Annualized released by the US Bureau of Economic Analysis shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Generally speaking, a high reading or a better than expected number is seen as positive for the USD, while a low reading is negative.