USD/CAD – Struggling Canadian Dollar at 1.34 as US Advance GDP Sparkles

USD/CAD has posted slight gains on Friday. In the North American session, the pair is trading at the 1.34 line. In the economic front, Advance GDP jumped 2.9% in the third quarter, easily beating the forecast of 2.5%.Later in the day, the US will release UoM Consumer Confidence. The markets are expecting the indicator to drop to 88.2 points. There are no Canadian events on the schedule.

The Canadian dollar continues to struggle, as USD/CAD has pushed above the 1.34 line on Friday. The currency is trading at its lowest level since early March and has declined 2.1 percent in the month of October. The loonie didn’t get any help from the Bank of Canada last week, which maintained interest rates but was dovish about economic conditions. The BoC 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.

US Advance GDP jumped 2.9 percent, 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

Friday (October 28)

  • 8:30 US Advance GDP. Estimate 2.5%
  • 8:30 US Advance GDP Price Index. Estimate 1.3%
  • 8:30 US Employment Cost Index. Estimate 0.6%
  • 10:00 US Revised U0M Consumer Sentiment. Estimate 88.2
  • 10:00 US Revised UoM Inflation Expectations

*All release times are EDT

*Key events are in bold

USD/CAD for Friday, October 28, 2016

USD/CAD October 28 at 8:45 GMT

Open: 1.3387 High: 1.3418 Low: 1.3371 Close: 1.3400

USD/CAD Technical

S1 S2 S1 R1 R2 R3
1.3120 1.3253 1.3371 1.3457 1.3551 1.3648
  • 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 is a weak support line
  • 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 Friday session, consistent with the lack of movement from USD/CAD. Currently, short positions command a strong majority (68%), 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.