USD/CAD: Trading the Canadian GDP Dec 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 Friday at 13:30 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.

GDP has looked sluggish recently,  with  November release coming in at a flat 0.0%. The forecast for the upcoming release  calls for a negligible rise of 0.1%.  Will the indicator surprise the markets and beat the low estimate?

Sentiments and levels

With more QE from the US and the US economy showing improvement, Canada can continue growing receiving positive flows. Also the  excellent employment numbers in  November and the fact that the price of oil has stabilized  bode well for the loonie.  Finally, the Canadian dollar should benefit if there is a resolution to the fiscal cliff crisis south of the border. Thus, the overall sentiment is  bearish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.00, 0.9950, 0.9910, 0.9880 , 0.9817 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: 0.5% 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: -0.3% to -0.6%:   A lower GDP figure than predicted could cause the  pair to climb and break one resistance line.
5. Well below expectations:  Below -0.6%. If GDP shows serious contraction, USD/CAD  could rise and could break a second resistance level.

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

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