Summary:

• Canadian GDP was more or less in line with estimations 
• USDCAD could be prone to a corrective move to the upside

The Canadian economy grew 0.2% mom and 3.3% yoy in April while expectations had pointed to increases by 0.2% mom and 3.4% yoy. Looking at the USDCAD one could assume that traders are satisfied with such outcomes. 

There is no doubt that the CAD has been among the strongest currencies recently, mainly on the back of a more hawkish tone from BoC’s members. Since then, we’ve known a better than expected reading on retail sales which has propped up a continued downtrend. Today’s data seems to confirm bullish view when it comes to the Canadian currency. 

Canadian economy expanded a bit less than expected, however an upward trajectory in GDP as well as retail sales seems to be maintained. Source: Bloomberg

It’s worth stressing that 14 out of 20 sectors in the Canadian economy advanced. Services industries increased 0.3%, while good producing industries were virtually unchanged given a monthly basis. All in all, macroeconomic data is getting better, although inflation is still the weakest spot (however, this’s the case seen not just there). 

The USDCAD is decreasing another session in a row being already quite far away from a long-term trend line. Source: xStation5

Having looked at the chart above one could notice that the pair is keeping on its massive downtrend. The pair has managed to break out of a downward limit of a channel along with the long-term trend line. Such moves could be treated quite bearish. The nearest target which bears could aim for it’s placed at around 1.2830. 

Having said that, we cannot rule out corrective moves to the upside. This’s especially true when we take into consideration quite elevated odds regarding a possible rate increase from the BoC’s at its July meeting. Nevertheless, at this stage, it seems that upward moves could be a selling opportunity. At the end, let us recall our longer-term outlook for the USDCAD.