USD/CAD: Trading the Canadian GDP Sep 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. 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

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, as an unexpected reading can quickly affect the movement of USD/CAD.

After three straight declines, GDP  regained good form in June and posted a gain of 0.5%, beating the estimate of 0.2%. However, the markets are expecting a softer reading for July, with an estimate of a 0.2% gain.

Sentiments and levels

The Fed balked at a rate hike in September, but  there  is some hawkish talk coming out of the Fed, and  we  could see  Yellen press the rate trigger before the end of the year. The Canadian dollar is flirting with 11-year lows, and could lose more ground this week against the surging US dollar. So, the overall sentiment is  bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.3587, 1.3443, 1.3346, 1.3215, 1.3165  and  1.3063.

5 Scenarios

1. Within expectations:  -0.1% to +0.3%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: +0.4% to +0.8%: An unexpected higher reading can send  the pair  below one support line.
3. Well above expectations: Above +0.8%: 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: -0.2% to +0.2%:   A weaker reading than expected could push the pair  past one  resistance line.
5. Well below expectations:  Below -0.2%.  In  this scenario, USD/CAD could  break above a second resistance level.

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