The Gross Domestic Product (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.
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 as an unexpected reading could affect the direction of USD/CAD.
GDP has been in positive territory for most of 2012, and posted an increase of 0.3% in June. The market estimate for the July reading is for a slight drop, to 0.2%.
Sentiments and levels
Continuing weak US data continues to concern the markets, and could hurt the US dollar. As well, remarks by ECB head Mario Draghi to take “all measures” to preserve the euro has helped the loonie. Thus, the overall sentiment is bearish on USD/CAD towards this release.
Technical levels, from top to bottom: 1.02, 1.0150, 1.0066, 1.00, 0.9950, and 0.99.
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.
Above expectations: 0.6% to 0.9%: An unexpected higher reading can send the pair below one support line.
Well above expectations: Above 0.8%: A surge in the reading would push USD/CAD downwards, and a second support level might be broken as a result.
Below expectations: -0.5% to -0.2%: A lower GDP figure than predicted could cause the pair to climb and break one level of resistance.
Well below expectations: Below -0.5%. In this scenario, USD/CAD could rise and could break a second resistance level.