USD/CAD: Trading the Canadian GDP Jan 2014

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 Friday at 13:30 GMT.

Indicator Background

The 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 and treat it as a market-mover.

GDP has been very steady, posting three straight readings of 0.3%. It should be noted that each of these readings have been above the forecast. The estimate for the December release stands at 0.2%. If the indicator falls short of the forecast, we could see the loonie lose ground.

Sentiments and levels

The wobbly Canadian dollar is in deep trouble, having coughed up around six cents since the start of 2014. With the Federal Reserve announcing a second taper on Wednesday, the US dollar could pick up more ground. North of the border, the Canadian economy continues to sputter, with low levels of inflation continuing to weigh on the economy. Thus, the overall sentiment is neutral on USD/CAD towards this release.

Technical levels, from top to bottom: 1.1535, 1.1369, 1.0945, 1.1124, 1.1000, and 1.0853.

5 Scenarios

1. Within expectations: 0.0% 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 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: -0.4% to -0.1%:  A contraction in economic growth reading could cause the pair to climb and break one level of resistance.
5. Well below expectations: Below -0.5%. A very weak reading would likely hurt the loonie and USD/CAD could break above a second resistance level.

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

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