USD/CAD – All Quiet as Markets Await Canadian GDP

USD/CAD is flat on Friday, as the pair trades at 1.3160 in the European session. It should be a busy day on Friday, as we await three key events on Friday. The US will release two key events, Employment Cost Index, a key inflation indicator, and UoM Consumer Sentiment. In Canada, we’ll get a look at one of the most important indicators, Canadian GDP. The markets are bracing for a weak gain of 0.1%.

On Thursday, US Advance GDP for the third quarter posted a gain of 1.5%. This was a much softer reading than the Final GDP in Q2 of 3.9%, but was very close to the forecast of 1.6%. Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand.

The Federal Reserve policy statement was the highlight of the week, and the currency markets reacted sharply after a surprise hawkish statement from the US central bank. The markets had lowered expectations about a rate hike before the end of the year, but the Fed statement revived the possibility of a December hike, stating that it would raise rates when there is further improvement in the US labor market and when inflation rises closer to the 2% target. The Fed provided some clarity in the following excerpt, something which has been sorely missing from previous statements:

“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation” [emphasis mine]

The next Fed meeting is mid-December, and the markets will be in alert mode for any further hints about a rate hike. As well, key US numbers will be closely monitored, especially employment and inflation data, as the strength of these numbers in the next several weeks will play a critical role in determining whether the Fed will press the rate trigger in December. Still, traders should keep in mind that the markets sometimes overreact to Fed statements or comments from Fed policymakers, and the central bank could easily continue to wait on the sidelines until 2016.

USD/CAD Fundamentals

Friday (Oct. 30)

• 12:30 US Employment Cost Index. Estimate 0.6%
• 12:30 US Core PCE Price Index. Estimate 0.2%
• 12:30 US Core Personal Spending. Estimate 0.2%
• 12:30 US Core Personal Income. Estimate 0.2%
• 13:45 US Chicago PMI. Estimate 49.5 points
• 14:00 FOMC Member John Williams Speaks
• 14:00 US Revised UoM Consumer Sentiment. Estimate 92.6 points
• 14:00 US Revised UoM Inflation Expectations
• 12:30 Canadian GDP. Estimate 0.1%

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Friday, October 30, 2015

USD/CAD October 30 at 11:35 GMT

USD/CAD 1.3160 H: 1.3168 L: 1.3124

USD/CAD Technical

• USD/CAD was unchanged in the Asian session. The pair posted slight losses in European trading and this has continued in the North American trade.
• 1.3063 is an immediate support line.
• 1.3165 continues to be busy has switched to a resistance role. This weak line could see further action during the day.
• Current range: 1.3165 to 1.3213

Further levels in both directions:

• Below: 1.3063, 1.2930 and 1.2823
• Above: 1.3165, 1.3213, 1.3327 and 1.3457

OANDA’s Open Positions Ratio

USD/CAD ratio is showing some movement towards short positions, a reversal of what we saw on Thursday. Short positions command a majority of positions (57%). This is indicative of trader bias towards USD/CAD moving to lower ground, consistent with the current movement of the pair.

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.