The Canadian dollar has posted small gains for a third straight day. In Thursday’s North American session, USD/CAD is trading at 1.3131, down 0.11% on the day.
US GDP, jobless claims draws a yawn from USD/CAD
In the US, GDP plunged by over 30% in the second quarter, but the sharp drop was expected, so investors and traders didn’t bat an eyelid. The second-estimate release showed the economy declined at an annual rate of 31.7%, which was a bit better than the initial estimate of 32.9% back in July. Still, the figure reflects the severe economic downturn caused by the Covid-19 virus, particularly the lockdowns in April and May which brought much of the US economy to a grinding halt.
Unemployment claims were down slightly last week, but continue to hover around the 1-million mark, which suggests that the recovery in the labor market is stalling. Jobless claims dipped to 1.006 million, down from 1.1o6 million in the previous release. We’ll get a better idea of the health of the labor market next week, with the release of August nonfarm payrolls and wage growth.
Canadian dollar gaining ground, slowly
Slowly but surely, the Canadian dollar has been making inroads against its American counterpart. Since falling 4.9% in a dismal month of March, the Canadian dollar has clawed back from these losses and continues to gain ground, rising 2.0% in August. The US dollar has retreated against the major currencies in recent months, and the Canadian dollar has taken advantage, despite being a minor currency which tends to underperform in times of crisis. With the US struggling to control Covid-19 and the fiscal stimulus package still stuck in Congress, the Canadian dollar mini-rally could well continue.
- 1.3187 is the next resistance line. Above, there is resistance at 1.3232
- 1.3114 is the first support level. This is followed by support at 1.3087
- USD/CAD has broken below the 10-day MA line, which is a bearish sign for the pair
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