USD/CAD: Trading the Canadian GDP Oct 2012

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 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

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 and treat it as a market-mover for USD/CAD.

GDP has shown very modest growth of late, with two consecutive readings of 0.2%. The markets are expecting an  identical reading in the upcoming release.

Sentiments and levels

Although the BOC statement was hawkish, Canada is facing headwinds from the dropping price of oil and worries  over the housing sector. The loonie has had a rough couple of weeks, as it has crept very close to the parity line. A rebound in the US economy could change the course of the pair, as Canada  is heavily dependent  on US demand. But while US growth  has  been  encouraging, it still points to slow growth, as underscored by the Fed  Policy  Statement last week.  Thus, the overall sentiment is  bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0066, 1.0030, 1.00, 0.9975, 0.9950 and 0.9880.

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  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: -0.5% to -0.2%:   A lower GDP figure than predicted could push the pair  upwards, breaking one line of resistance.
5. Well below expectations:  Below -0.5%. In this scenario, USD/CAD  could rise  and break a second resistance line.

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

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