USD/CAD – Canadian Dollar Jumps as GDP Beats Expectations

After strong gains on Tuesday, USD/CAD is steady in Wednesday’s European session. The pair is currently trading at 1.3460. On the release front, we’ll get a look at key US job numbers, with the release of ADP Nonfarm Payrolls. The markets are expecting a reading of 185 thousand, which would be much lower than the previous reading of 205 thousand. Thursday brings additional employment data, with the release of US Unemployment Claims. There are no Canadian releases on Wednesday.

The Canadian dollar posted superb gains in the month of February, gaining over 400 points against its US counterpart. The impressive rally has continued in March, as the currency jumped over 100 points on Tuesday, propelled by a Canadian GDP report which was stronger than expected. Canadian GDP is released monthly, and the January release of 0.2% beat the estimate of 0.1%. Although GDP actually dropped from December, the sentiment towards the loonie remains high in the markets, as the recent recovery in oil prices, although modest, has been good news for Canada, a major oil producer. The Canadian dollar has been hit hard by the collapse in oil prices as USD/CAD climbed close to the 1.47 line in January. GDP climbed 1.2% in 2015, well off the 2014 pace of 2.5%. What can we expect from the Canadian economy in the first quarter? Economists are divided, with projections ranging from 0.5 percent to 1.0 percent.

The US economy has slowed down in early 2016, unable to maintain the torrid pace which characterized the second half of last year. This has dampened expectations about a rate hike by the Federal Reserve in March, as Fed policymakers have stated that economic conditions will have to improve before another monetary move. Meanwhile, January reports from the US housing sector are raising concerns. Housing Starts and Building Applications fell in January, and New Home Sales and Pending Home Sales followed suit, missing expectations. Activity in the housing sector is closely monitored by analysts, as a decrease in home building can affect other sectors of the economy. The US manufacturing sector has also struggled, but there was positive news last week as Core Durable Goods Orders and Durable Goods Orders were much stronger than expected in January.

USD/CAD for Wednesday, March 2, 2016

USD/CAD March 2 at 7:00 EST

Open: 1.3428 Low: 1.3413 High: 1.3468 Close: 1.3458

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted small gains in European session
• 1.3457 remains under pressure and is a weak support line
• There is resistance at 1.3587
• Current range: 1.3457 to 1.3587

Further levels in both directions:

• Below: 1.3457, 1.3318 and 1.3223
• Above: 1.3587, 1.3757 and 1.39

USD/CAD Fundamentals

Tuesday (March 1)

• 8:30 Canadian GDP. Estimate 0.1%. Actual 0.2%
• 10:00 US ISM Manufacturing PMI. Estimate 48.5 points. Actual 49.5 points

Upcoming Key Events

Wednesday (March 2)

• 8:15 US ADP Nonfarm Employment Change. Estimate 185K
• 10:30 US Crude Oil Inventories. Estimate 2.5M
• 14:00 US Beige Book

Upcoming Key Events

Thursday (March 3)

• 8:30 US Unemployment Claims. Estimate 271K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 49.8 points

*Key events are in bold

*All release times are EST

For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement, consistent with the lack of activity from USD/CAD. Long positions retain a slight majority of positions (53%). This points to slight trader bias towards USD/CAD continuing to lose ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.