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

Canadian GDP came in at -0.6% in May, shy of the forecast of -0.5%. The markets are expecting much better news in the June report, with an estimate of +0.5%. Will the indicator match or beat this rosy prediction?

Sentiments and levels

The Fed has hinted that a rate hike or even two before the end of the year are on the agenda, and this could bolster the US dollar. However, if rising oil prices continue to rise, the Canadian dollar could gain ground.  So, the overall sentiment is neutral on USD/CAD towards this release.

Technical levels, from top to bottom: 1.3353, 1.3219, 1.3081, 1.2990, 1.29 and 1.2804.

5 Scenarios

1. Within expectations: 0.2% to 0.8%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.9% to 1.3%: An unexpected higher reading can send  the pair  below one support line.
3. Well above expectations: Above 1.3%: An  unexpected surge  by the indicator  would likely push  USD/CAD downwards, and a second support level might be broken as a result.
4. Below expectations: -0.3% to +0.1%:   A weak reading could cause the  pair to climb and break one level of resistance.
5. Well below expectations:  Below -0.3%. 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.