Recession GDP Reading Push USDCAD To Two Week Lows

Summary:
• USDCAD is under selling pressure for the third consecutive session making fresh two week lows. The contraction in U.S. GDP was worse than analysts estimates

USDCAD is under selling pressure for the third consecutive session making fresh two week lows. The contraction in U.S. GDP was worse than analysts estimates. The economy contracted at 4.8% below the analysts’ estimates of -4%, making the steepest quarterly contraction since the fourth quarter of 2008, and the first since negative figure since the first quarter of 2014. The U.S. is entering a recession with most analysts expecting the second quarter of 2020 to be even worse.

Personal consumption slumped -7.6% below the expectations of -3.6%. The first-quarter drop in U.S. personal consumption was the biggest since 1980 and reflected only one full month in the coronavirus crisis. The Core PCE rose 1.8%, topping the market expectations of 1.7%. The GDP price index rose 1.3% also above the expectations of 1.0%.

Federal Reserve will release the monetary policy statement and the interest rate decision later today but I don’t expect to change something after the GDP data as it was already widely expected that the GDP will be sharply lower. Fed will keep the interest rates unchanged but will reassure investors that will do whatever it takes to combat the coronavirus outbreak impact on the economy.

Canadian Loonie also gets a hand today by the rebound in crude oil prices. Brent crude is 2.3% higher at 20.46 per barrel while the WTI crude futures for June delivery trades 26.18% higher at $15.57.

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USDCAD Price Technical Levels to Watch

The USDCAD is 0.45% lower at 1.3934 close to daily lows after the weak U.S. fundamental data weigh. The pair correction from multiyear highs is intact and now approaches the 50-day moving average resistance at 1.3903. The technical picture remains bullish but is threatened now in case the pair breaches below 1.3903.    

From a technical perspective, first support for USDCAD stands at 1.3911 the daily low. If the USDCAD pair breaks below, the next support will be met at 1.3873 the low from April 15 trading session. Next level to watch is at 1.3731 the low from March 16.  

On the other side, the initial resistance for the pair stands at 1.4003 the daily top. If the USDCAD pair breaks higher, the next resistance area will be met at 1.4069 the high from April 28 trading session. If the pair keeps the positive momentum the next hurdle stands at 1.4203 the high from April 23.