CANADIAN DOLLAR RALLIES ON GDP BEAT – USDCAD, CADJPY, EURCAD IN FOCUS
The Canadian Greenback flexed its muscle mass following the Q2 Canada GDP report, however loonie power might be short-lived with the September BOC assembly loomingUSDCAD and CADJPY have confirmed indicators of a reversal try whereas EURCAD eyes contemporary 2019 lowsTry IG Shopper Sentiment information for perception on the bearish and bullish biases of merchants
Canada’s Q2 GDP report got here in hotter than anticipated at a stable three.7% annualized fee which compares to the three.zero% estimate and zero.5% studying within the interval prior. The Canadian Greenback, measured through the CXY Canadian Greenback Foreign money Index, jumped instantly after as foreign exchange merchants reacted to the headline GDP determine crossing the wires. The loonie continues to be up modestly to this point throughout at the moment’s buying and selling session, however upside has begun to fade as markets digest the small print of the Q2 Canada GDP report.
CXY – CANADIAN DOLLAR CURRENCY INDEX PRICE CHART: 15-MINUTE TIME FRAME (AUGUST 28, 2019 TO AUGUST 30, 2019)
Chart created by @RichDvorakFX with TradingView
Canadian GDP progress in the course of the second quarter was largely attributed to a wholesome three.2% rise in exports – predominantly led by a rise in power and fishing product exports to the tune of 5.9% and 15.2% respectively. Constructive contributions to GDP progress have been additionally credited to authorities outlays and falling imports.
But, Q2 GDP progress in Canada was slowed down by a notable 1.6% drop in enterprise funding and uninspiring slowdown in family spending to zero.1% from zero.7% within the first quarter. Wanting ahead, markets will possible await the upcoming rate of interest determination from the Financial institution of Canada slated for subsequent week for perception on the central financial institution’s newest financial coverage stance.
BANK OF CANADA INTEREST RATE CHANGE PROBABILITIES
Whereas the BOC is essentially anticipated to depart rates of interest unchanged at 1.75% in line with in a single day swaps pricing, commentary offered by Governor Poloz stands to underscore the BOC’s comparatively hawkish place. Actually, Friday’s Q2 GDP information beat despatched the likelihood of a September BOC rate of interest reduce down to five.2% from 17.7% every week in the past.
Though, the BOC and Governor Poloz might trace at openness to a dovish shift in financial coverage in mild of basic headwinds – notably in response to the affect that ongoing international commerce tensions are having on enterprise funding and future outlook – and stays a draw back danger to the Canadian Greenback. That is instructed by the uptick within the likelihood of an rate of interest reduce earlier than yr finish which simply elevated to 74.zero% following the Q2 GDP information from yesterday’s studying of 69.eight%.
USDCAD PRICE CHART: DAILY TIME FRAME (MAY 22, 2019 TO AUGUST 30, 2019)
Turning to the charts, we see that spot USDCAD continues to point out indicators of eager to edge decrease, however is discovering technical help from the foreign money pair’s bullish uptrend that also stays intact. Spot USDCAD has dropped beneath its 200-day easy shifting common and mid-point retracement of its Might 31 swing excessive, but at the moment’s drop might chalk as much as be one other head-fake much like what was witnessed on August 26 when costs probed the prior-standing uptrend line.
CADJPY PRICE CHART: Four-HOUR TIME FRAME (JULY 31, 2019 TO AUGUST 30, 2019)
Indicators of waning upward momentum for the Canadian Greenback may be hinted at by spot CADJPY working out of steam because the foreign money pair approaches technical resistance posed by its 38.2% Fibonacci retracement of its August buying and selling vary. If the short-term uptrend starting to kind since buying and selling resumed this week fails to maintain spot CADJPY afloat, costs might possible drift down towards the 23.6% Fib round 79.500. This bearish pivot will possible warrant extra credence if spot CADJPY slips under its 200-SMA on the Four-hour chart and MACD crossover which can be looming.
EURCAD PRICE CHART: Four-HOUR TIME FRAME (JULY 30, 2019 TO AUGUST 30, 2019)
Alas, latest Canadian Greenback power is most observable when taking a look at spot EURCAD. At the moment’s push by the loonie has sank spot EURCAD under help from technical confluence across the 1.4700 deal with, which might open up the door to retest year-to-date lows close to the 1.4600 stage.
— Written by Wealthy Dvorak, Junior Analyst for DailyFX.com
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