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USD/CAD to Extend Bullish Pattern on Dismal Canada GDP Report

USD/CAD to Extend Bullish Pattern on Dismal Canada GDP Report

- Canada Gross Domestic Product (GDP) to Contract for First Time Since 2Q 2015.

- 1.5% Contraction Would Mark Biggest Slowdown Since 2Q 2009.

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Trading the News: Canada Gross Domestic Product (GDP)

Canada’s 2Q Gross Domestic Product (GDP) report may drag on the loonie and fuel the near-term advance in USD/CAD as the economy is expected to contract 1.5% following the 2.4% expansion during the first three-months of 2016.

What’s Expected:

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Why Is This Event Important:

A dismal GDP report may encourage the Bank of Canada (BoC) to further support the real economy as the region continues to adjust to the oil-price shock, but the one-off event spurred by the Alberta wildfires may have a limited impact on the monetary policy outlook as Governor Stephen Poloz and Co. argue ‘the risks to the profile for inflation are roughly balanced.’

Expectations: Bearish Argument/Scenario

Retail Sales (MoM) (JUN)0.5%-0.1%
Building Permits (MoM) (JUN)1.5%-5.5%
Net Change in Employment (JUN)5.0K-0.7K

Easing job growth accompanied by the slowdown in private-sector consumption may spark a sharp contraction in the growth rate, and a dismal GDP report may trigger further losses in the Canadian dollar as it drags on interest-rate expectations.

Risk: Bullish Argument/Scenario

Ivey Purchasing Manager Index (JUN)51.251.7
BoC Senior Loan Officer Survey (2Q)--23.9
CFIB Business Barometer (JUN)--60.0

Nevertheless, the pickup in business sentiment paired with signs of stronger investment may generate a better-than-expected GDP print, and a positive development may spur a bullish reaction in the loonie as it raises the BoC’s scope to retain the current policy throughout 2016.

How To Trade This Event Risk(Video)

Bearish CAD Trade: Growth Rate Contracts Annualized 1.5% or Greater

  • Need to see green, five-minute candle following the release to consider a long trade on USD/CAD.
  • If market reaction favors a bearish loonie trade, buy USD/CAD with two separate position.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit.

Bullish CAD Trade: Canada 2Q GDP Exceeds Market Expectations

  • Need red, five-minute candle to favor a short USD/CAD trade.
  • Implement same setup as the bearish Canadian dollar trade, just in reverse.

Potential Price Targets For The Release


USD/CAD Daily Chart
  • USD/CAD may work its way back to the July high (1.3253) as it carves a near-term series of higher highs & lows following the Fed Economic Symposium, all while the Relative Strength Index (RSI) breaks out of the bearish formation carried over from the end of July; next hurdle comes in around 1.3130 (38.2% retracement) followed by 1.3210 (78.6% expansion).
  • Key Resistance: 1.3560 (100% expansion) to 1.3570 (50% retracement)
  • Key Support: 1.2510 (78.6% retracement) to 1.2520 (38.2% expansion)

Check out the short-term technical levels that matter for USD/CAD heading into the report!

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Impact that Canada Gross Domestic Product has had on USD/CAD during the last quarter

PeriodData ReleasedEstimateActualPips ChangePips Change




12:30 GMT


1Q 2016 Canada Gross Domestic Product (GDP)

USD/CAD 5-Minute


The Canadian economy grew an annualized 2.4% in the first-quarter following a revised 0.5% expansion during the last three-months of 2015, with the pickup led by a 2.1% rise in private-sector consumption. A deeper look at the report showed business investment slipped another 1.7% during the same period after contracting 6.0% during the last three-months of 2015, while exports of goods and services advanced 6.9%. The Canadian dollar struggled to hold its ground following the weaker-than-expected Gross Domestic Product (GDP) report, with USD/CAD coming off of 1.3020 to end the day at 1.3091.

Get our top trading opportunities of 2016 HERE

Read More:

S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

EUR/JPY Technical Analysis: Sticking to the Range

EURUSD: Waiting for the Dip & Rip- Key Resistance at 1.1400

--- Written by David Song, Currency Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.