USD/CAD: Trading the Canadian GDP Jun 2012

The Gross Domestic Product (GDP) is a measurement of the production and growth of the economy, and analysts consider GDP one the most important indicators of economic activity. A reading which is  higher than the market forecast is bullish for the Canadian dollar.

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

Published on Friday at 12:30 GMT.

Indicator Background

The Canadian GDP is released  monthly and provides an excellent indication of the health and direction of the economy. Traders should pay particular attention to this economic indicator as an unexpected reading can affect the movement of USD/CAD.

GDP showed  little growth in the  previous reading, with a increase of only 0.1%. The market prediction for the June reading is up a notch, to 0.2%. Will GDP meet or beat this month’s market forecast?

Sentiments and levels

The Canadian economy has been fairly steady, but there are several factors weighing on the loonie.  With the Canadian economy heavily dependent on its neighbor to the south, weaker US demand for Canadian goods and resources hurts the export sector. As well,  there  are serious concerns  about a housing bubble in Toronto, and the  falling prices of oil  is always bad for the Canadian currency.  Thus, the overall sentiment is  bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0460, 1.0360, 1.03, 1.0245, 1.02 and 1.0150.

5 Scenarios

1. Within expectations:  0.1% to 0.5%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.6% to 0.9%: An unexpected higher reading can send  the pair  well below one support line.
3. Well above expectations: Above 0.9%:  A strong GDP reading  would push  USD/CAD downwards, and a second support level might be broken as a result.
4. Below expectations: -0.3% to 0.0%:   A lower GDP figure than predicted could cause the  pair to climb and break one level of resistance.
5. Well below expectations:  Below -0.3%. A significant contraction in GDP could give  USD/CAD  a lift,  and a second resistance level could be broken as a result.

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