Upbeat Canada GDP Sends USDCAD Towards Mid-January Lows

Summary:

Canada GDP (monthly) beats estimates and sends the USDCAD towards the mid-January lows, as it makes a push to break the 1,3000 barrier.

The USDCAD is trading lower on the day as the loonie consolidates on its strengthening on the greenback following upbeat GDP numbers. Canadian GDP (month) registered at 6.5%, which was better than the previous reading of 4.5% and also better than the 5.2% that analysts had expected. Despite the plunge in the real GDP in Canada by 38.7% on an annualized basis in Q2 2020, the numbers released by Statistics Canada were still good enough to allow for bullish sentiment on the CAD as the annualized GDP fell by less than the 39.6% consensus number.

The CAD is also riding on the 0.86% gain in oil prices on the day, which solidifies its 61 pips gain over the greenback on the day as at the time of writing. The 6.5% monthly GDP gain is the largest monthly increase seen in the last 60 years. The US Dollar continues to be riled by the impact of yesterday’s Jackson Hole Symposium speech by FOMC Chair Jerome Powell, who announced a new inflation targeting regime that would allow the Fed seek a “moderate overshoot”, later interpreted by the Dallas Fed President Robert Kaplan as a 2.25% – 2.50% inflation target.

The USDCAD currently trades at 1.30661, after touching off intraday lows at 1.30471, just above mid-January lows .

Technical Outlook for USDCAD

Having cleared past the 1.31501 support level with yesterday’s lower close, the USDCAD is now aiming for the support at 1.30385. A breakdown of this price level opens the door towards the 1.29953 price level, with the October 2018 lows at 1.29241 beckoning as additional support.

Only a bounce at the 1.30385 support would prevent this from happening, allowing the USDCAD to retest the 1.31501 former support now acting as resistance. Above this level, price touches off the return line of the descending channel at 1.32044 (previous lows of 21 February and 17 August). 1.33487 is only approachable if the price breaks above the channel.