USD/CAD: Trading the Canadian GDP Jul 2014

Canadian GDP is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. 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 12:30 GMT.

Indicator Background

The Canadian GDP is released  monthly, unlike most other developed countries which  post GDP on a quarterly basis.  The key indicator provides an excellent indication of the health and direction of the economy. Traders should pay particular attention to  Canadian  GDP  and treat it as a market-mover.

Canadian GDP  has been  steady but unimpressive, posting  two  straight readings of 0.1%.  The estimate for the  June release stands at 0.3%. If the indicator can beat expectations, the shaky Canadian dollar could get a boost.

Sentiments and levels

US  numbers continue to point in the right direction,  led by the all-important employment indicators.  Although inflation remains weak, market sentiment is strong, and this has help the dollar post gains against  its rivals.  The Canadian economy has not been able to keep pace with its southern neighbor, and we could see the Canadian dollar, which is already above the 1.08 line,  continue to  weaken. Thus, the overall sentiment is  bearish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.1124, 1.10, 1.0945, 1.0815, 1.0737 and 1.0660.

5 Scenarios

1. Within expectations:  0.1% to 0.5%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.6% to 0.9%: A strong  reading could send  the pair  below one support line.
3. Well above expectations: Above 0.9%: An  unexpected surge in the reading  could push  USD/CAD downwards, and a second support level might be broken as a result.
4. Below expectations: -0.3% to 0.0%:   A contraction in  economic growth would likely cause the  pair to climb and break one level of resistance.
5. Well below expectations:  Below -0.3%. A very weak reading would likely hurt the loonie and  USD/CAD could break above a second resistance level.

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

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