USD/CAD: Trading the Canadian GDP Mar 2015

Canadian GDP is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity and  a reading which is better than the market forecast is bullish for the Canadian dollar.

Update:  Canadian GDP rises 0.3% – USD/CAD falls

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

Published on Tuesday at 13:30 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.

GDP  has been  losing ground in recent readings, and the November report  came in at  -0.2%, close to the estimate of  -0.1%. The markets are expecting a gain of 0.1% in the December release. If the indicator fails to break into positive territory, we could see the Canadian dollar lose ground.

Sentiments and levels

Canadian growth continues to lag behind its southern neighbor, and this could be underscored by weak GDP and inflation data this week. In the US, Fed chair Yellen tried to dampen expectations about a mid-rate hike in her Congressional testimony, but a strong NFP could boost the June rate expectations. So, the overall sentiment is  bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.2924, 1.2711, 1.2541, 1.2387, 1.2230, and 1.2114.

5 Scenarios

1. Within expectations:  -0.2% to 0.4%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.5% to 0.9%: An unexpected higher reading can send  the pair  below one support line.
3. Well above expectations: Above 0.9%: An  unexpected surge in the reading  would push  USD/CAD downwards, and a second support level might be broken as a result.
4. Below expectations: -0.7% to -0.3%:  A contraction in  economic growth  reading could cause the  pair to climb and break one resistance line.
5. Well below expectations:  Below -0.7%. A very weak reading would likely hurt the loonie and  USD/CAD could break above a second resistance line.

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

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