US GDP and EUR/USD pair.

The release of US GDP data has an undeniable impact on all currency pairs in which the dollar is present. If you take any textbook on investing or stock trading, very much attention is paid to the GDP indicator,

Moreover, after reading information about the possible impact of GDP on the dollar exchange rate, the opinion that this is 100 percent news, on which almost everyone makes money, is smoothed out.

Having attended courses where they talk about how fundamental market analysis is carried out, you will also be told how by publishing this data you can earn large sums of money by devoting only a couple of minutes of your time to analyzing this indicator.

But is this really the case? Is the news really working itself out the way almost all trading gurus and various educational textbooks say?

First, let's briefly recall what GDP means and what exactly is its importance for any trader. GDP is primarily a macroeconomic indicator that reflects the cost of all goods and services that were produced and provided in a certain country, and in our case we are considering the USA.  

The indicator is released quarterly, or in simple words, once every three months, but on a monthly basis, clarifying data is released that shows the dynamics of the country’s GDP development. Actually, the majority of traders conduct their trading based on monthly data.

What is the value of this indicator?

First of all, it shows the growth rate of the economy or, if the indicator worsens, its regression. Why does the indicator reflect the growth rate of the economy? When calculating it, value data is taken into account in four main categories, such as consumer goods, investments, government income and expenses, and net exports.

You can further describe which expenses belong to each of the categories, but I think it is already clear that the indicator covers the entire economy of the country. Thus, the publication of US GDP data has a strong impact on the decision-making of both investors and traders, and this is especially noticeable at the time the news is released.

In order to understand whether the news really works the way everyone says it does, I propose to consider data on the last 4 indicators of US GDP and simulate the probability of earnings or loss if we were trading on the EUR/USD currency pair .

We will take into account only the number of points that the chart passes through for positive and negative data, and we will also calculate the time frame in which the main movement is observed.

06/24/2015 is a day that many people remember ambiguously. The fact is that analysts predicted GDP growth from -0.7 percent to -0.2, which is exactly what happened. But many were confused by the negative indicator, which, whatever one may say, indicates a deterioration in the economy.

Therefore, one would not expect a strong market reaction from this news, however, compared to the previous indicator, there is a noticeable improvement, so it would be worth observing a fall in the chart of the EUR/USD currency pair. The reaction itself can be seen in the picture below:

Despite its significance, the news worked itself out, moving extremely weakly, only 32 points within 3 hours and 40 minutes, with the main movement falling on the first candle. At the end of the news, you can observe a strong price surge, which brought the news to its original point.

On July 30, 2015, the analysts’ forecast actually came true, and we were able to observe GDP growth from 0.6 percent to 2.3 percent. Such a rapid growth of the indicator could not go unnoticed by market participants, so we should observe a rapid decline in the chart of the EUR/USD currency pair, since against the backdrop of positive data on the USD, the euro simply fades. The behavior of the chart at the time of news release is shown in the picture below:

Initially, the market reacted ambiguously, moving some distance against the news, but 15 minutes later the market reacted to the publication of the data and moved the price by 47 points. The market moved the price at this rhythm for four hours, after which a new trend was formed.

On August 27, 2015, US GDP data came out more positive than even expected, since if in the previous month we received an increase of 2.3 percent, the actual figure was 3.7 percent. Thus, it is quite expected that the EUR/USD chart is purposefully going down. The price behavior at the time of news release is shown below:

The market fully reacted to the news, moving 80 points within four hours.
The news ended with the formation of a new trend, as in the previous two versions. On September 25, 2015, US GDP was published at 3.9 percent, which meant growth against the previous figure, which was 3.7 percent.

By all laws of logic, the chart of the EUR/USD currency pair should go down, since we have an excellent signal for the growth of the US economy. How the market reacted, see the picture below:

The chart shows that the market did not react to the news in any way, and in addition to the lack of reaction in the right direction, we can observe an increase in the currency pair by 75 points, which defies any logic.

Summing up, we can say with confidence that we are often misled by saying that news always works itself out and leads to a strong movement and trend reversal.

In fact, we saw that out of four options, only in three the price went according to the planned scenario, and the effect of the news lasted no more than 4 hours, and at the end of it, a new trend opposite to the received data was formed. If we talk about the profitability of the news, then from four transactions with a profit of 30 points and the same moose, we would get approximately the following figures: 30 + 30 + 30-30 = 60 points of profit.

The calculation is rough without using a trailing stop , which would allow us to squeeze more out of the market, but it fully reveals the potential without risky trading for this indicator on the EUR/USD currency pair.