USD/CAD: Trading the Canadian GDP

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 Tuesday at 13:30 GMT.

Indicator Background

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  close attention to  this indicator, as an unexpected reading can quickly affect the movement of USD/CAD.

Canadian GDP declined 0.3% in October, missing the estimate of a 0.1% gain. This marked the first decline since May. GDP is expected to get back on track in November, with an estimate of 0.3%.

Sentiments and levels

Just a week into his new job, Donald Trump has not shied away from controversy. The new president withdrew the US from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement, which could spell bad news for Canada. If US inflation levels move higher, we could see the Fed step in with additional rate hikes which is bullish for the US dollar..  So, the overall sentiment is bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.3433, 1.3351, 1.3219, 1.3124, 1.3003 and 1.2908

5 Scenarios

1. Within expectations: 0.0% to 0.6%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.7% to 1.1%. An unexpected higher reading could send  the pair  below one support line.
3. Well above expectations: Above 1.1%. A surge  by the indicator  would likely push  USD/CAD downwards, and a second support level might be broken as a result.
4. Below expectations: -0.5% to -0.1%. A contraction in GDP could see the  pair climb and break one level of resistance.
5. Well below expectations:  Below -0.5%. A strong contraction in economic growth 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.