USD/CAD – Canadian Dollar Unchanged at 1.34, GDP Looms

USD/CAD is unchanged on Monday. In the North American session, the pair is trading at the 1.34 line. Taking a look at today’s releases, US Personal Spending climbed 0.5%, matching the forecast. Chicago PMI dropped to 50.6 points, well off the estimate of 54.1 points. On Tuesday, Canada releases GDP, with the markets expecting a weak gain of 0.2%. The US will publish ISM Manufacturing PMI, with an estimate of 51.8 points.

The wobbly Canadian dollar continues to trade above the 1.34 line, close to 7-month lows against the strong greenback. The Canadian economy has not been performing well and the Bank of Canada recently downgraded its forecasts for economic growth, projecting GDP to grow 1.1 percent in 2016, down from its forecast of 1.3 percent in July. For 2017, growth is expected at 2.0 percent, down from 2.2 percent in July. Canadian inflation levels remain weak and this was underscored by a poor showing from the Raw Materials Price Index, which posted a third straight decline in September, coming in at -0.1%. The markets had forecast a solid gain of 0.5%. The GDP release for August will be published on Tuesday, with the markets braced for a weak gain of 0.2%, after a respectable gain of 0.5% in July. If GDP is weaker than expected, the Canadian dollar could rack up further losses.

US Advance GDP jumped 2.9 percent in the third quarter, and the rosy number will be great news for Fed policymakers who want to raise rates in December. Currently, a hike is priced in at impressive 72 percent. The prospect of a US rate hike for the first time in a year has helped the US dollar gain ground at the expense of the Canadian currency. The US economy remains strong, buoyed by a labor market that is close to capacity, with unemployment at a healthy 5.0%. Inflation levels, however, remain low and are unlikely to show much improvement in the next few months. Although the Fed would prefer stronger inflation, other economic indicators remain strong enough such that the lack of inflation is unlikely to be the critical factor in the Fed rate decision. The Fed will also hold a policy meeting in early November, but is unlikely to make any rate moves just before the US presidential election.

USD/CAD Fundamentals

Monday (October 31)

• 8:30 Canadian RMPI. Estimate +0.5%. Actual -0.1%
• 8:30 Canadian IPPI. Estimate 0.4%. Actual 0.4%
• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.5%. Actual 0.5%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 9:45 US Chicago PMI. Estimate 54.1. Actual 50.6
• Tentative – US Loan Officer Survey

Tuesday (November 1)

• 8:30 Canadian GDP. Estimate 0.2%
• 10:00 US ISM Manufacturing PMI. Estimate 51.8

*All release times are EDT

*Key events are in bold

USD/CAD for Monday, October 31, 2016

USD/CAD October 31 at 11:10 GMT

Open: 1.3405 High: 1.3424 Low: 1.3371 Close: 1.3403

USD/CAD Technical

• USD/CAD has shown limited movement in the Asian and the European sessions. The pair has posted slight gains early in the North American session
• 1.3371 was tested in support earlier and remains under pressure
• There is resistance at 1.3457

Further levels in both directions:

• Below: 1.3371, 1.3253, 1.3120 and 1.3028
• Above: 1.3457, 1.3551 and 1.3648
• Current range: 1.3371 to 1.3457

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Monday session, consistent with the lack of movement from USD/CAD. Currently, short positions command a strong majority (67%), indicative of trader bias towards USD/CAD breaking out and moving to lower 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.