Summary:

• Canadian GDP beats forecasts
• M/M reading +0.4% vs +0.3% exp; prior -0.1%
•  EURCAD falls to lowest level since February 

According to the latest figures the Canadian economy bounced back from a disappointing drop in economic growth last month, with a higher than forecast increase in February. The GDP M/M figure came in at +0.4%, above the +0.3% seen in January and a marked improvement on the prior print of -0.1%. 

 USDCAD fell around 35 pips in the minutes following the release of better Canadian GDP data. Source: xStation

The Canadian dollar has been having a fairly good run of it of late, although this has largely gone unnoticed due to the resurgence of the buck and the weakness seen in the GBP and EUR currencies. In fact, over the past week CAD is the second best performer amongst the majors with only the USD outperforming. 

 The Canadian dollar has been fairly strong over the past week, with only USD performing better. Source: xStation

Whilst the USDCAD is the most keenly followed USD pair but the EURCAD may actually be at a more interesting level at the moment. The EURCAD price has fallen lower following the release and currently trades around its lowest level since mid-February – an 11-week low. 

 A head and shoulders formation could be seen to be active in EURCAD and as long as price remains below 1.5510 then further declines may lie ahead. Source: xStation

A longer term head and shoulders setup could be seen to be in play which would target a substantial move lower. As is often the case with head and shoulders setups the neckline can be subjective and here it appears differently whether we take a rising trendline or a horizontal support. Either way it appears now that both of these have been broken to trigger the setup. A daily close below 1.5510 would act as further confirmation of this break, whereas a move back above 1.5510 could be seen to negate the setup.