Image source: Edgar Bullon © 123RF.com
Statistics Canada just released its economic report on the recorded growth rate of the Gross Domestic Product for March.
The report revealed that the economy had contracted by a substantial 7.2 per cent in the wake of the coronavirus crisis. The findings of Statistics Canara demonstrated the largest monthly decline on record. However, the final results fell below the consensus forecasts, which projected a 9.0 per cent decline.
Canada GDP MoM Growth Rate. Image source: TradingEconomics.com
Similarly to the preliminary GDP data for Q1 that was released in the US yesterday, the Canadian economy has evidently suffered tremendously from the coronavirus fallout.
In addition to the economic strain from the pandemic and the government's decision to impose a national lockdown during the early days of the healthcare crisis, the Canadian GDP has also been hit from the woes of the energy market that were observed in early March.
The collapse of the oil prices in March delivered a devastating blow to the Canadian balance of trade, as the country is one of the biggest producers and exporters of the precious commodity in the world.
Canada Exports. Image source: TradingEconomics.com
Nevertheless, the energy market has managed to stabilise after the initial turmoil, and the rising oil prices are going to affect the jolted value of the Canadian dollar positively.
Meanwhile, the Loonie depreciated against the greenback following the release of today's data, which was prompted by the substantial size of the observed economic contraction.
As can be seen on the hourly chart below, the price action of the USDCAD rebounded from the lower boundary of the underlying consolidation range, which is represented by the minor support level at 1.37340.
This could be the beginning of a bullish correction in an otherwise prevailingly bearish market, which is inlined with our projections from earlier today.
In remains to be seen whether the bullish correction is going to be substantial enough to break out above the minor consolidation range and the major resistance level at 1.38500, or the market would resume establishing the new bearish trend.
Overall, today's GDP data in Canada is bad news for the value of the Loonie; however, it was mostly expected by the market. Hence, the market has had time to price in the poor performance, which means that the bullish correction is unlikely to be extended for too long.
In other words, the poor GDP numbers probably would not be substantial enough to prompt the development of a new bullish trend on the USDCAD.
Moreover, the fact that the size of the observed economic contraction is nearly 2 per cent smaller than initially anticipated would probably result in an even faster conclusion of the current bullish correction's establishment.
USDCAD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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