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The 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 and the direction of the Canadian economy. 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

The Canadian GDP is released  monthly and is a key economic indicator. Traders should pay particular attention to  the indicator, as an unexpected reading could affect the direction of USD/CAD.

GDP has been showing very modest growth recently, with a previous reading of 0.2%. The markets are expecting a slight  drop in September, with an estimate of 0.1%.

Sentiments and levels

The recent drop in the  price of oil is bearish for the loonie, and  more trouble in the US economy would translate into weaker demand for Canadian goods and resources. On the other hand, Canada is still enjoying QE3 and a relatively sound economy. Thus, the overall sentiment is  neutral on USD/CAD towards this release.

Technical levels, from top to bottom: 1.00, 0.9950, 0.99, 0.9817, 0.9729 and 0.9667.

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 0.8%: An unexpected higher reading can send  the pair  well below one support line.
  3. Well above expectations: Above 0.8%: 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: -0.6% 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, the loonie could take a hit, and USD/CAD could break a second resistance level.

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