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 12:30 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, as an unexpected reading can quickly affect the movement of USD/CAD.
GDP has struggled, posting three declines in the past four readings. The April reading came in at -0.1%, short of the estimate of +0.1%. The estimate for the June report stands at a flat 0.0%. If GDP contracts again in the upcoming release, we could see the loonie lose ground.
Sentiments and levels
The wobbly Canadian dollar has not recovered since the BOC surprised with a rate cut earlier in July. In the US, meanwhile, there is a strong expectation that the Fed will raise rates shortly, perhaps as early as September. So, the overall sentiment is bullish on USD/CAD towards this release.
Technical levels, from top to bottom: 1.3346, 1.3165, 1.3063, 1.2924, 1.2798 and 1.2673.
5 Scenarios
- Within expectations: -0.3% to +0.3%. In such a scenario, USD/CAD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: +0.4% to +0.7%: An unexpected higher reading can send the pair below one support line.
- 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.
- Below expectations: -0.7% to -0.4%: A significant contraction in economic growth reading could cause the pair to climb and break one level of resistance.
- Well below expectations: Below -0.7%. 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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