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A big contraction of 0.5% was seen in Canada in December 2013. This is significantly worse than expected. The Canadian economy was expected to shrink by 0.2% in December after growing by 0.2% in November. Year over year, a growth rate of 2.5% was expected for the whole of 2013 after a pace of 2.7% in November but the actual result is +2.9%.

The Canadian dollar remained on the defensive, with USD/CAD trading around 1.1130 before the release. In the immediate aftermath of the publication, USD/CAD jumped up to 1.1145 but immediately fell to 1.1111. It seems that the yearly number trump the monthly ones.

At the same time, the US released a revision of Q4 GDP: the US grew by only 2.4% (annualized) but the composition was better.

Update: USD/CAD continues dropping and dips below 1.11.  Quarter over quarter, Canada grew by 0.7%, just like in Q3.

Canadian releases have come out below expectations recently. In addition, the markets seem to find any opportunity to sell the loonie and ignore positive figures coming out of the country. On the charts though, there may be an opportunity for a change: a rejection candle print could point to a drop of Dollar/CAD.

Resistance for the pair appears at 1.1170, followed by the cycle high of 1.1224. Minor support stand at CAD/USD 0.90, which is 1.1111 on USD/CAD. Below, 1.1050, where the pair found support before the last rise.

For more, see the Canadian dollar outlook.