At 12.30 UTC the Canadian Monthly GDP will be published. The market is expecting a contraction of the Canadian economy to just 0.1% growth, a 2-point drop from the previous figure of 0.3%. This news release is coming against the backdrop of the FOMC interest rate decision later in the day. The Bank of Canada’s decision some weeks ago provided impetus for trading the USDCAD based on divergence of interest rate policy, but some strong data from the US in the last few days has caused this effect to wear off…at least until today.
Depending on the figures of the Canadian monthly GDP that are released to the market, there could be another opportunity to trade the USDCAD.
Trading the USDCAD on the News
The basis of today’s trade based on the data from Statistics Canada will depend on the extent of deviation between the actual and consensus numbers, when compared with the difference between the previous and consensus number (which is 0.2%). Therefore, the deviation trigger is a factor of 0.2%, meaning that we would need to see an actual result that is at least 0.3% or higher to sell USDCAD, or a figure of at least -0.2% or lower to buy the USDCAD. The expected market impact would be at least 30-50 pips within the first 15 minutes of the news release. Larger deviations will produce a bigger pip move within this time frame.
If the FOMC’s rate decision and statement comes in USD-negative and the Canadian GDP surprises to the upside, we can expect the USDCAD to be sold off by 80 – 100 pips later on today. If the news releases have a reversal in the scenario described above (USD-positive FOMC decision and poorer than expected Canadian GDP), then the USDCAD should extend the gains it has made in the last one week.
Watch the news figures closely and trade using protective stops to prevent undue choppiness from taking out positions.Don’t miss a beat! Follow us on Twitter.