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The Canadian Gross Domestic Product (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 Friday at 12:30 GMT.

Indicator Background

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 and treat it as a market-mover, as any unexpected reading could affect the direction of USD/CAD.

GDP growth has been weak throughout 2012.  The July release came in at 0.1%, below the market forecast of 0.2%. The estimate for the August release stands at 0.1%. Will the indicator surprise the markets with a better reading than predicted?

Sentiments and levels

The pair’s limit has likely   been reached now, especially as more weak data from Canada came in joining the  disappointing jobs report. The   relatively high oil prices have a weaker impact now. Another factor that could weigh on the loonie is a potential disappointment from Ben Bernanke in Jackson Hole on Friday. Thus, the overall sentiment is  bullish on USD/CAD towards this release, and we could see the  Canadian drop closer to the parity line.

Technical levels, from top to bottom: 1.0030, 1.00, 0.9950, 0.99, 0.9840 and 0.9725.

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: 0.4% to 0.7%: An unexpected higher reading can send  the pair  below one support line.
  3. Well above expectations: Above 0.7%: A very strong reading  could push  USD/CAD downwards, and a second support level might be broken as a result.
  4. Below expectations: -0.6% to -0.3%: A lower GDP figure than predicted could cause the  pair to climb and break one level of resistance.
  5. Well below expectations:  Below -0.6%. In this scenario, USD/CAD  could rise and could break a second resistance level.

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