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CAD Correction on the Cards After Canadian GDP Data

CAD Correction on the Cards After Canadian GDP Data

Martin Essex, MSTA, Analyst


- Canadian GDP data today will likely leave interest rate expectations unchanged.

- However, a brief “sell the rumor, buy the fact” rally is possible before the downtrend in CAD resumes.

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Canada GDP expectations

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The Canadian Dollar has continued to weaken against its US counterpart, as predicted here, but a brief rally could follow today’s Canadian economic growth data at 1330 GMT before the downtrend resumes. While the figures will likely leave Canadian interest rate expectations unchanged, a “sell the rumor, buy the fact” move could lift CAD temporarily.

The most important figure to look out for will be the third number in the table above – for quarter/quarter GDP growth annualized in the last three months of 2017. A higher than expected number would make an interest rate increase in Canada in the next few months a little more likely, while a lower than expected figure would reduce the chances of a rate rise.

However, the risks here are skewed. While better than forecast data would probably lift CAD, a weaker number might too as traders decide to take some of their profits from the recent sharp Canadian Dollar selloff illustrated here by a chart showing the rise in the US Dollar against it.


Latest USDCAD hourly price chart

Chart by IG

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At present, it seems likely that the Bank of Canada will leave interest rates on hold at its meeting on March 7 but the chances are roughly 50/50 that it will increase them at its following meeting on April 18, when it will publish its next Monetary Policy Report. While the prospect of an increase in rates should support the CAD, its weakness on a rallying USD, easier oil prices and concerns about the Nafta trade negotiations between the US, Canada and Mexico would likely resume once any correction is over.

In the meantime, note that from a technical perspective USDCAD faces strong resistance at 1.2917, only just above its current level, from the highs touched between late October and mid December last year. A move down to trendline support, currently at 1.2634 is therefore perfectly plausible before CAD weakens again.

USDCAD PRICE CHART, DAILY TIMEFRAME (October 17, 2017 – March 1, 2018)

Latest USDCAD daily price chart

Chart by IG

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Meanwhile, here are some key messages when trading FX that hopefully you will find useful. Note that:

- Successful traders cut losses, and let profits run,

- Successful traders use leverage effectively, and

- Successful traders trade at the right time of day.

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at or on Twitter @MartinSEssex

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