USD/CAD – Loonie Flies After Surprise OPEC Agreement, US Final GDP Next

The Canadian dollar has ticked lower on Thursday, following sharp gains in the Wednesday session. Currently, USD/CAD is trading at 1.3080. In the US, today’s key release is Final GDP, with the estimate standing at 1.3%. We’ll also get a look at unemployment claims and pending home sales. There are no Canadian releases on the schedule. On Friday, Canada releases GDP, while the US will publish UoM Consumer Sentiment.

The Canadian dollar jumped on Wednesday, courtesy of a surprise announcement that OPEC members had reached a deal on cap production at a meeting in Algiers. Analysts had expected yet another inconclusive meeting, especially after Saudi Arabia and Iran had said that an agreement would not be reached before November. US crude surged 4.5% after the news and pushed the Canadian dollar higher by 1.0 percent.

US consumer confidence data continue to impress the markets with excellent readings. The CB Consumer Confidence jumped to 104.1 points in September, much higher than the forecast of 98.6 points. This excellent release improved upon a strong August report of 101.1 points. Stronger consumer confidence often translates into increased spending by consumers, which is vital for economic growth. If upcoming consumer spending numbers also move higher, the likelihood of a December hike will likely increase. Currently, the markets have priced in a quarter-point hike in December at 48 percent.

With the Federal Reserve staying on the sidelines in September and the November meeting just before the US election, the markets have circled December as the next date for a possible rate hike. Last week’s policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike. Currently, a rate hike is priced in at 48 percent, but plenty can happen before the December policy meeting. The Fed has been sending out mixed messages about a rate hike, and this was underscored in the September decision, in which three FOMC members dissented and voted for an immediate hike. This lack of clarity has been disconcerting to the markets, which are always allergic to uncertainty. The markets haven’t forgotten that last December, the Fed projected a series of hikes in 2016, and has yet to deliver even one hike this year. As we approach December, the Fed will need to send out a more uniform message in order to restore its credibility with the markets.

USD/CAD Fundamentals

Thursday (September 29)

• 8:30 US Final GDP. Estimate 1.3%
• 8:30 US Unemployment Claims. Estimate 260K
• 8:30 US Final GDP Price Index. Estimate 2.3%
• 8:30 US Goods Trade Balance. Estimate -62.6B
• 10:00 US FOMC Member Jerome Powell Speaks
• 10:00 US Pending Home Sales. Estimate -0.1%
• 10:30 US Natural Gas Storage. Estimate 57B
• 16:00 US Federal Chair Janet Yellen Speaks

Friday (September 30)

• 8:30 Canadian GDP. Estimate 0.3%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.1

* Key releases are in bold

*All release times are EDT

USD/CAD for Thursday, September 29, 2016

USD/CAD September 29 at 7:50 GMT

Open: 1.3065 High: 1.3115 Low: 1.3045 Close: 1.3075

USD/CAD Technical

• USD/CAD showed little movement in the Asian session. In European trade, the pair has posted slight gains
• 1.3120 switched to resistance on Wednesday following sharp losses by USD/CAD
•  1.3028 is providing support

Further levels in both directions:

• Below: 1.3028, 1.2922 and 1.2815
• Above: 1.3120, 1.3253, 1.3371 and 1.3457
• Current range: 1.3028 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio is showing slight movement towards short positions. Currently, short positions have a strong majority (60%), indicative of trader bias towards USD/CAD reversing directions and moving downwards.

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.