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USD/CAD: Canadian Greenback Ripe for Breakout however GDP Information Looms

CANADIAN DOLLAR PRICE OUTLOOK EYES Q2 GDP DATA

Canadian Greenback in a single day implied volatility readings bounce noticeably as foreign exchange merchants anticipate the potential for sizable swings in spot charges USDCAD appears ripe for a technical break and Canada GDP knowledge due for launch throughout Friday’s buying and selling session, which is able to seemingly weigh on BOC financial coverage, might spark the transferOn the lookout for potential commerce concepts? Take a look at our High Buying and selling Alternatives for 2019

USDCAD has remained stubbornly dedicated to buying and selling across the 1.33 deal with following the head-fake breakdown beneath bullish trendline help earlier this week. We famous on Monday that Canadian Greenback outlook appeared set to rebound in opposition to its US counterpart, which materialized, however spot USDCAD shortly whipsawed again greater after bouncing off a key Fibonacci help stage that we additionally highlighted. That stated, the Canadian Greenback nonetheless appears ripe for main technical break given the present technical backdrop and simply so occurs to align with the upcoming launch of Q2 Canada GDP knowledge slated for Friday at 12:30 GMT which might function a basic catalyst sparking its subsequent huge transfer.

CANADIAN DOLLAR IMPLIED VOLATILITY & TRADING RANGES

Canadian Dollar Implied Volatility and Trading Range Table USDCAD, EURCAD, GBPCAD, AUDCAD, CADJPY

In mild of the high-impact occasion threat surrounding the Canadian Greenback (particulars could be discovered on the DailyFX Financial Calendar right here), the bounce in in a single day implied volatility readings is to be anticipated. Among the many loonie crosses, CADJPY is anticipated to be probably the most energetic foreign money pair throughout Friday’s buying and selling session with an in a single day implied volatility studying of 14.18%. Anticipated CADJPY worth motion is elevated seemingly on account of a slew of Japanese financial knowledge on deck due for launch later in at present’s session at 23:50 GMT. GBPCAD is anticipated to be the second most energetic foreign money pair tomorrow with an in a single day implied volatility studying of 11.49% and has climbed largely owing to the latest rise in no-deal Brexit fears.

CANADA ECONOMIC SURPRISE INDEX (CITI)

Canada Economic Surprise Index Ahead of Q2 GDP Report

The response within the Canadian Greenback will finally rely on whether or not GDP knowledge comes in step with the foreign exchange market’s expectations or catches merchants off-guard. Turning to the Citi financial shock index for Canada, we see that the info has usually been better-than-expected however financial power seems to have waned since its latest peak again in early June. Nonetheless, whether or not the headline year-over-year Q2 Canada GDP knowledge is reported above or beneath the 1.four% median consensus determine largely stands to dictate how the Financial institution of Canada (BOC) communicates its subsequent financial coverage stance.

BANK OF CANADA INTEREST RATE MOVE PROBABILITIES (SEPTEMBER 2019)

BOC Bank of Canada Interest Rate Cut Probability September 2019

Though the BOC shouldn’t be more likely to make a transfer on the central financial institution’s September four assembly, a spike within the chance that Governor Poloz and the Governing Committee will determine to chop rates of interest has critical potential to lavatory down the Canadian Greenback. Additionally, a very disappointing Q2 Canada GDP report may very well be the ultimate anecdote that the Financial institution of Canada must justify a dovish pivot in coverage.

USDCAD 25-DELTA RISK REVERSAL (OVERNIGHT)

USDCAD Risk Reversal Chart

Quite the opposite, proof of continued power within the Canadian financial system might maintain the BOC on the sidelines and could also be sufficient to encourage USDCAD bears to make a serious push decrease. Additionally,the sharp drop in USDCAD’s threat reversal studying is price noting because it means that foreign exchange choice merchants have gotten much less bullish on the foreign money pair. But, the danger reversal studying stays comfortably above zero indicating that, on stability, the demand for name choice volatility outweighs that of put choices as merchants search spot USDCAD upside safety.

USDCAD PRICE CHART: DAILY TIME FRAME (MAY 27, 2019 TO AUGUST 29, 2019)

USDCAD Price Chart Technical Analysis

As talked about within the opening paragraph, spot USDCAD appears geared for a technical breakdown. A significant space of confluence has developed across the 1.3300-1.3350 worth zone which stays a frightening headwind for potential upside in spot USDCAD. Though, help offered by the mid-point retracement stage of the foreign money pair’s June-August buying and selling vary might present a level of buoyancy to identify costs. Extra importantly, the battle for USDCAD to make a strong break beneath its 200-DMA might warrant paying extra consideration to as worth motion unfolds – notably if an general strong Q2 Canada GDP report fails to ship spot USDCAD decrease.

— Written by Wealthy Dvorak, Junior Analyst for DailyFX.com

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