Canada Q2 GDP rose 2.9%, well above the 1.4% recorded in Q1 and 0.1% higher than what the Bank of Canada has forecasted. This mornings data was 0.1% lower than the 3.0% predicted but that disappointment was offset, to a degree, by the upward revision in Q1, from 1.3% to !.4%. Growth was driven by a 2.9% increase in export volumes which should put a smile on the faces at the Bank of Canada. Consumer spending also increased. The BoC forecast Q2 GDP growth at 2.8%
USDCAD traders were not impressed. They were expected at least 3.0% or higher, and they showed their disappointment by selling Canadian dollars. USDCAD jumped to 1.2974 from 1.2925, triggering some stop losses on the move above 1.2950
The US Personal Income data was as forecast and didn’t have much impact on FX markets.
Canada is rarely a major focus in global FX markets, but it has been for the past few days and will continue for the next few days as well.
Canadian and US officials say that they are optimistic that a deal is within reach. Prime Minister Trudeau repeated that Canada wouldn’t be pressured into a bad deal saying “No NAFTA deal is better than a bad NAFTA deal.” The key sticking points are reportedly, Canada’s closed dairy market and the sunset clause.
Canada GDP is expected to rise 3.0%, y/y and 0.1% in June. Better than expected data followed by a trade deal announcement will drive USDCAD toward 1.2500, fueled by speculation that the Bank of Canada would raise rates next week.
The US dollar opened in New York with small gains across the board, except against the Japanese yen. The Swiss franc was unchanged from Wednesday’s close.
EURUSD drifted lower in Asia, rallied in early European trading and then dropped from 1.1717 to 1.1686 after weaker than expected German inflation data. Prices rebounded into the New York open despite mixed to some Eurozone Confidence data which was a tad soft due to trade worries.
GBPUSD consolidated yesterday’s gains which occurred on positive comments from the European Union’s chief Brexit negotiator, The risk of GBPUSD buying for month-end portfolio rebalancing purposes has also underpinned the currency pair.
USDJPY is struggling to make a decisive break above resistance in the 111.60 area. Prices topped out at 111.74 and are currently trading at 111.40.
NZDUSD got spanked after posting weaker than expected Business Confidence numbers. AUDUSD suffered a similar fate but to a lesser extent when Building Permits and Private Capital expenditures data was weaker than forecast
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish while prices are below 1.2980, which is guarding the longer term downtrend line at 1.3040. A break of minor support in the 1.2880-1.2905 area will extend losses to 1.2740. For today, USDCAD support is at 1.2940 and 1.2905. Resistance is at 1.2980 and 1.3005.
Today’s Range 1.2920-1.2980