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Before you close up shop and cram your holiday shopping, why don’t you try catching some last-minute pips? Let’s try our hand at trading the Canadian GDP release!

What the heck is a GDP report?!

It doesn’t stand for “Great Dane Puppies,” that’s for sure. Gross domestic product (GDP) is simply the total output (goods and services) produced in a country. Market geeks add domestic consumption, investments, government expenditures, and net exports (imports-exports) to come up with the GDP figures.

Tomorrow at 2:30 pm GMT Canada will print its GDP report for the month of October. This time around analysts are looking for a 0.1% uptick following the 0.0% growth that we saw for the month of September.

The report could go either way, of course. For one thing, wholesale and retail sales missed their expectations in September. Canada’s trade numbers, on the other hand, had surprised to the upside while the IVEY PMI data also clocked in a few notches above market expectations. Talk about a tossup!

To help your trading preparations, let’s see what happened to USD/CAD the last time the GDP report came in worse and better than its previous releases:

November release: 0.0% actual vs. -0.1% previous

Canada strong retail sales width=

During Canada’s GDP release last November 30, the actual figure posted a flat reading for the month of September instead of meeting the consensus of a 0.1% uptick. The good news though is that the actual figure was still better than the previous month’s 0.1% economic contraction, which explains why the Loonie was able to rally by roughly 20 pips against the Greenback right after the release.

October release: -0.1% actual vs. 0.2% previous

Canada weak retail sales width=

The October 31 GDP release, on the other hand, showed a surprisingly weak reading as the actual figure showed a 0.1% decline in economic activity for August. This was worse than the estimated 0.2% uptick and the previous month’s 0.2% expansion. With that, USD/CAD jumped from the .9980 area and landed above parity, where it consolidated for the rest of the U.S. session.

As you’ve noticed from the charts I’ve posted, USD/CAD tends to have an inverse correlation with how the actual figure compares to the previous month’s reading. In other words, the Loonie usually reacts positively if the actual figure comes in higher than the previous month’s GDP reading. If the actual GDP reading comes in weaker than the previous figure, on the other hand, the Loonie tends to get sold off.

Because the report is just a monthly assessment of Canada‘s economic performance, price typically has a limited reaction compared to quarterly data. If you’re a scalp trader, then this could be a pretty good profit opportunity for you as the release usually sparks 20 to 30-pip moves.

If you’re trading this release, don’t forget to watch out for nearby inflection points, such as major and minor psychological levels, which could act as support or resistance during the U.S. session. Do take note of potential X-factors, such as U.S. reports or oil price updates, which could also have an impact on USD/CAD’s price action.