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.
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 dipped to 0.1% in August, matching the forecast. This was the indicator’s weakest reading in three months. More of the same is expected, with another gain of 0.1% forecast in the September report.
Sentiments and levels
With the US economy looking solid, a historic rate hike is likely next week at the Fed policy meeting. So, the overall sentiment is bullish on USD/CAD towards this release.
Technical levels, from top to bottom: 1.3759, 1.3587, 1.3443, 1.3353, 1.3213 and 1.3165.
5 Scenarios
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.
Above expectations: 0.4% to 0.8%: 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 likely push USD/CAD downwards, and a second support level might be broken as a result.
Below expectations: -0.7% to -0.3%: 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.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
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