Canadian dollar should enjoy good GDP
Posted on October 29, 2009 by Yohay
Filed Under Forex Opinions | 11 Comments
After being blown away from parity following the rate decision, Canada’s monthly GDP might help the Canadian dollar. The good GDP release in the US could signal that also Canada’s GDP is will be on the bright. Here’s a preview for the Canadian GDP.
Canada publishes its monthly GDP on Friday at 12:30 GMT. Canada is unique in publishing a monthly GDP, but it’s published late – 2 months after the month ended. Tomorrow’s GDP is for the month of August, in the middle of the third quarter.
After 10 consecutive months of falling, Canadian GDP rose in June by 0.1%. July followed with an unchanged number. The slow recovery was quite disappointing one month ago. This time, economists expect a 0.1% rise once again.
Today’s American Advance GDP for the whole third quarter was very good. It rose by 3.5% (annualized) exceeding expectations. America is out of recession. This ignited risk appetite, and also helped the Canadian dollar gain against the US dollar.
It also raised the hopes for a positive GDP in Canada. The Canadian economy is very dependent on the American one. Growth in the US means higher demand for goods, and this also helps the Canadian economy.
Another reason for expecting a good GDP result in Canada is the higher prices of oil in recent months. Oil is trading around $80 after trading for a long time in the 60s. Although a significant part of this rise happened only in September, this rise will also impact Canada, which exports lots of oil.
USD/CAD Technical Preview
USD/CAD now trades at 1.0671, between two technical barriers: 1.0625 from below and 1.08 from above. It bounced off the resistance line of 1.08 after the American GDP publication.
It still is above the 1.0625 line, that served beforehand as a resistance line. A good GDP result in Canada will send USD/CAD below this line, where it will encounter the 1.04 area. It broke below 1.04 when excellent employment figures where released there.
A disappointing GDP result – contraction in August, will send USD/CAD above 1.08. The next resistance line is 1.1130. See the USD/CAD Forecast for more.
I believe that the Canada’s GDP for August will be positive, but of course, anything can happen.
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