USD/CAD – Canadian Dollar Shrugs off Soft GDP

The Canadian dollar continues to trade quietly on Thursday. In North American trade, USD/CAD is trading at 1.2902, down 0.18% on the day. On the release front, Canada GDP declined 0.1%, missing the estimate of +0.1%. There was more disappointing news on the inflation front, as the Raw Materials Price Index declined 0.3%, well below the estimate of a 2.8% gain. In the US, unemployment claims impressed, dropping to 215 thousand. This easily beat the estimate of 230 thousand. Consumer confidence also improved, as UoM Consumer Sentiment rose to 101.4, breaking past the 100-barrier for the first time since October. However, the indicator missed the estimate of 101.9 points.

The US economy continues to show strong expansion. Revised GDP for the third quarter came in at 2.9%, beating the estimate of 2.7%. This reading was revised upwards from the initial GDP estimate of 2.5%. Fourth quarter growth, although solid, could not keep up with a superb third quarter, which posted a gain of 3.2%. As for 2018, first quarter growth is expected to soften to 1.8%, but there is still a strong chance that the economy could hit 3% growth this year, as promised by US President Trump. The catalysts for such a rosy prediction are the massive tax cut and higher government spending. Where does this leave the Federal Reserve, which raised interest rates last week? Currently, the Fed is projecting to more rate hikes this year, but if the economy remains strong and inflation levels move closer to the Fed target of 2%, we could see four rate increases in 2018.

Negotiations over the NAFTA agreement continue, and positive statements from US negotiators have raised hopes that a new agreement will be reached between Canada, Mexico and the US. A key sticking point has been a US demand to increase the US content in vehicles made in NAFTA members, but the Trump administration has apparently backed down on this requirement. The gloomy air around the talks has improved, and there is cautious optimism that the sides can hammer out a new agreement in the next few weeks. A breakthrough in the talks would be bullish for the Canadian dollar, as NAFTA is a key component of the Canadian economy.

USD/CAD Fundamentals

 Thursday (March 29)

• 8:30 Canadian GDP. Estimate 0.1%. Actual -0.1%
• 8:30 Canadian RMPI. Estimate +2.8%. Actual -0.3%
• 8:30 Canadian IPPI. Estimate 0.4%. Actual 0.1%
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.2%
• 8:30 US Unemployment Claims. Estimate 230K. Actual 215K
• 8:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 9:45 US Chicago PMI. Estimate 62.1. Actual 57.4
• 10:00 US Revised UoM Consumer Sentiment. Estimate 101.9. Actual 101.4
• 10:00 US Revised UoM Inflation Expectations. Actual 2.8%
• 10:30 US Natural Gas Storage. Estimate -75B. Actual -63B

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, March 29, 2018

USD/CAD, March 29 at 12:15 EST

Open: 1.2924 High: 1.2931 Low: 1.2902 Close: 1.2905

USD/CAD Technical

USD/CAD was flat in the Asian session. In European trade, the pair edged higher but then retracted. USD/CAD is showing limited movement in the North American session

• 1.2850 is providing support
• 1.2930 is a weak resistance line
• Current range: 1.2850 to 1.2930

Further levels in both directions:

• Below: 1.2850, 1.2757 and 1.2687
• Above: 1.2930, 1.3050, 1.3165 and 1.3260

OANDA’s Open Positions Ratio

USD/CAD ratio is showing limited movement this week. Currently, short positions have a majority (56%), indicative of USD/CAD continuing to move lower.

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