USD/CAD – Canadian Dollar Climbs as GDP Beats Estimate

The Canadian dollar has posted considerable gains in Friday’s North American session. Currently, USD/CAD is trading at 1.3020. The Canadian dollar responded positively as Canadian GDP in July gained 0.5%, better than the estimate of 0.3%. Canadian RMPI improved to -0.7%, beating the forecast of -1.0%. Later in the day, we’ll get a look at UoM Consumer Sentiment, with the markets predicting a strong reading of 90.1 points.

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. However, the loonie surrendered much of these gains on Thursday, as the US posted better-than-expected GDP and jobless claims.

The US economy expanded 1.4% in the second quarter, revised from the preliminary estimate of 1.1%. Consumer spending has been strong, making up for sluggish business investment and weaker demand for US exports. The US consumer is optimistic about the economy, as underscored by recent CB consumer confidence surveys, which have been above the 100-level for two months running. On the labor front, unemployment claims came in at 254 thousand, marking the eighth straight week that jobless claims have come in below the forecast.

US consumer confidence numbers continue to impress the markets. 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.

USD/CAD Fundamentals

Friday (September 30)

• 8:30 Canadian GDP. Estimate 0.3%. Actual 0.5%
• 8:30 Canadian RMPI. Estimate -1.0%. Actual -0.7% 
• 8:30 Canadian IPPI. Estimate -0.1%. Actual -0.5%
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.0%
• 8:30 US Personal Income. Estimate 0.2%. Actual 0.2%
• 9:45 US Chicago PMI. Estimate 52.1. 
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.1
• 10:00 US Revised UoM Inflation Expectations

* Key releases are in bold

*All release times are EDT

USD/CAD for Friday, September 30, 2016

USD/CAD September 30 at 8:45 GMT

Open: 1.3153 High: 1.3195 Low: 1.3085 Close: 1.3120

USD/CAD Technical

• USD/CAD showed little movement in the Asian and European sessions. The pair has posted sharp gains in the North American session
• 1.3120 is a weak resistance line
•  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 little change in the Friday session. Currently, short positions have a strong majority (62%), indicative of trader bias towards USD/CAD reversing directions and moving downwards.

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