USD/CAD: Trading the Canadian GDP Jan 2013

The Gross Domestic Product (GDP) is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity, and its release is always eagerly anticipated by the markets.  A reading which is better than the market forecast is bullish for the Canadian dollar.

Here are all the details, and 5 possible outcomes for USD/CAD.

Published on Thursday at 13:30 GMT.

Indicator Background

The Canadian GDP is released  monthly and provides an excellent indication of the health and direction of the economy. Traders should pay particular attention to this key indicator, as any unexpected reading can affect the direction of USD/CAD.

The December release rose by a weak 0.1%,  and  the estimate for the upcoming release is a  notch higher, at 0.2%.  Will the indicator surprise the markets with a strong performance?

Sentiments and levels

The relatively dovish rate decision and forecast by the Bank  of Canada has hurt the loonie, has investors were hoping for a rate increase sooner rather than later. However, the rate move still isn’t as bearish as QE4 in the US. In addition, the Canadian economy is still in a better shape, although  the Canadian recovery is also facing  some bumps along the way.  The pair is likely to consolidate around parity, just from the other side. Thus, the overall sentiment is  neutral on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0250, 1.02, 1.01, 1.0066, 1.oo and  0.9950.

5 Scenarios

1. Within expectations:  -0.4% to 0.2%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.3% to 0.7%: An unexpected higher reading can send  the pair  below one support line.
3. Well above expectations: Above 0.7%: A strong reading  would push  USD/CAD downwards, and a second support level might be broken as a result.
4. Below expectations: -0.8% to -0.5%:   A lower GDP figure than predicted could cause the  pair to climb and break one level of resistance.
5. Well below expectations:  Below -0.8%. In this scenario, USD/CAD will likely rise and could break a second resistance level.

For more on the loonie, see the USD/CAD forecast.

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