USD/CAD Tests 1.3360 Hurdle Even as BoC Warns of Stronger 4Q GDP

Canada Growth Rate to Expand for Second Straight Quarter.

Bank of Canada (BoC) Warns 4Q GDP Could Be ‘Slightly Stronger than Expected.’

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Trading a News: Canada Quarterly Gross Domestic Product (GDP)

With Canada’s enlargement rate projected to boost an annualized 2.0% in a final three-months of 2016, a slack in mercantile activity might fuel a near-term allege in a USD/CAD sell rate as it encourages a Bank of Canada (BoC) to tame seductiveness rate expectations.

What’s Expected:

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Why Is This Event Important:

Even yet a Bank of Canada (BoC) argues ‘growth in a fourth entertain of 2016 might have been somewhat stronger than expected,’ Governor Stephen Poloz and Co. seem to be in no rush to lift a benchmark seductiveness rate from a record-low as ‘the Bank’s 3 measures of core inflation, taken together, continue to indicate to element additional ability in a economy.’ With that said, a diverging paths for financial process might continue to teach a long-term bullish opinion for USD/CAD generally as Fed Fund Futures now uncover a incomparable than 60% luck for a Mar rate-hike.

Expectations: Bullish Argument/Scenario

Improved certainty accompanied by a ongoing alleviation in a labor marketplace might beget another better-than-expected GDP report, and a certain enlargement might lean a BoC to dump a dovish tinge over a entrance months as signs of stronger enlargement boosts a opinion for inflation.

Risk: Bearish Argument/Scenario

Nevertheless, rising submit costs interconnected with a slack in private-sector expenditure might drag on a enlargement rate, and a gloomy GDP imitation might moderate a seductiveness of a Canadian dollar as it puts vigour on Governor Poloz to serve support a genuine economy.

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How To Trade This Event Risk(Video)

Bullish CAD Trade: Canada GDP Report Continues to Beat Market Expectations

  • Need to see red, five-minute candle following a recover to cruise a brief trade on USD/CAD.
  • If marketplace greeting favors a bullish Canadian dollar trade, sell USD/CAD with dual apart position.
  • Set stop during a near-by pitch high/reasonable stretch from entry; demeanour for during slightest 1:1 risk-to-reward.
  • Move stop to entrance on remaining position once initial aim is hit; set reasonable limit.

Bearish CAD Trade: Growth Rate Expands Less Than 2.0% per Annum

  • Need green, five-minute candle to preference a prolonged USD/CAD trade.
  • Implement same setup as a bullish Canadian dollar trade, only in a conflicting direction.

Potential Price Targets For The Release

USD/CAD Daily

USD/CAD Daily Chart

Chart – Created Using Trading View

  • USD/CAD stands during risk of fluctuating a miscarry from a Fibonacci overlie around 1.2980 (61.8% retracement) to 1.3020 (50% expansion) as it clears a near-term range, with a Relative Strength Index (RSI) highlighting a identical energetic and breaks out of a holding pattern; need a break/close above 1.3360 (38.2% retracement) to open adult a subsequent topside area of seductiveness around 1.3450 (23.6% retracement) to 1.3460 (61.8% retracement).
  • Interim Resistance: 1.3630 (38.2% retracement) to 1.3660 (78.6% expansion)
  • Interim Support: 1.2980 (61.8% retracement) to 1.3020 (50% expansion)

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Impact that Canada’s GDP news has had on USD/CAD during a prior quarter

3Q 2016 Canada Gross Domestic Product (GDP)

USD/CAD 10-Minute

USD/CAD Chart

Chart – Created Using Trading View

Canada equivocate a technical retrogression in 2016, with a enlargement rate expanding an annualized 3.5% following a revised 1.3% constrictive during a three-months by June. The miscarry in mercantile activity was incomparable driven by a pickup in net-exports, with domicile expenditure advancing 2.6% during a same period, while private-sector spending narrowed 1.3% followed a 5.3% enlargement in a second-quarter. The marketplace greeting to a GDP news was short-lived, with USD/CAD bouncing behind from 1.3359 to finish a day during 1.3437.

Read More:

Euro Unmoved by Upbeat Data as Politics and Trump Grab Traders’ Attention

Silver Price Squaring Off with Notable Resistance

Technical Weekly: USD/JPY – Just a Dip?

Gold Prices Mar into Fresh 2017 Highs- Fed Outlook in Focus

— Written by David Song, Currency Analyst

To hit David, e-mail dsong@dailyfx.com. Follow me on Twitter during @DavidJSong.

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