Loonie yawns as building permits surge

The Canadian dollar is trading quietly in the Thursday session. Currently, USD/CAD is trading at 1.2844, down 0.01% on the day. On the fundamental front, it’s a quiet session ahead of Christmas Day. There are no US releases, and just one Canadian event, Building Permits. This indicator jumped 12.9% in November, crushing the forecast of 2.5 per cent. The catalyst behind the surge was due to demand for multi-family buildings in Ontario and British Columbia. This was an impressive recovery from a dismal release in October, when Building Permits fell by 14.6 per cent.

Canada’s GDP shows slight rise

Canada’s economy grew by 0.4% in October, down from a 0.8% pace in September. This beat the estimate of 0.3% and the reaction of the Canadian dollar has been muted. The slight gain in GDP wasn’t much to write home about but did mark a sixth straight month of growth. GDP continues to move upward, offsetting the record low drops in GDP in March and April.

Even with the recent upswing in GDP, the Bank of Canada has forecast that the economy will contract by 5.7% this year, and inflation will be 0.6%, well below the central bank’s target of 2 percent. The bank expects things to brighten in 2021, with GDP expected to grow by 4.2% and inflation to hit 1.0% percent. Despite the gloomy picture for 2020, the Canadian dollar remains at high levels, as pro-cyclical currencies like the Canadian dollar have made sharp gains against the sagging US dollar. With the Biden administration expected to implement further easing measures in order to boost the US economy, the Canadian dollar should continue to shine early in the New Year.

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USD/CAD Technical

• USD/CAD is testing resistance at 1.2825. Close by, there is resistance at 1.2868, followed by 1.2936
• There is support at 1.2714, followed by a support line at 1.2646
• USD/CAD is putting downward pressure on the 20-day MA line. A break below this line would signify a downturn for the pair

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