USD/CAD - Loonie Gains As U.S. GDP Contracts

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 |  Includes: FXC, UDN, UUP
by: Dean Popplewell

The Canadian dollar has posted gains on Thursday, as USD/CAD trades in the mid-1.08 range in the North American session. It has been a busy day on the release front. In the US, Unemployment Claims dropped sharply, while Preliminary GDP posted a rare decline. Pending Home Sales didn’t provide much relief, as the key indicator was well short of expectations. In Canada, the current account deficit narrowed, improving to an eight-month high.

US numbers were mostly a disappointment on Thursday. Preliminary GDP, the primary gauge of economic activity, posted its first decline since Q2 of 2009. The indicator came in at -1.0% for Q1, worse than the estimate of -0.6%. Harsh winter conditions took their toll on the economy in Q1, and analysts expect a rebound in Q2. After a strong gain in March, Pending Home Sales softened, coming in at 0.4%. This was nowhere near the gain of 1.1%. On a brighter note, Employment Claims dropped to 300 thousand, easily beating the estimate of 321 thousand.

The US consumer continues to be optimistic, which is critical for the US recovery. On Tuesday, CB Consumer Confidence continued to look strong as the key indicator improved to 83.0 points in April, which was within expectations. This was the third straight reading above the 80-point level. Meanwhile, the Standard & Poor’s/Case-Shiller house price index posted a strong gain of 12.4%, surpassing the estimate of 11.9%.

The Canadian Current Account improved in April, with the deficit narrowing to $12.4 billion, matching the forecast. Current account is closely linked to currency demand, as a lower deficit means foreigners have purchased more Canadian goods and services. Earlier in the week, Corporate Profits jumped 7.4% in Q1, its strongest gain since Q4 of 2011.

USD/CAD for Thursday, May 29, 2014

USD/CAD May 29 at 15:20 GMT

USD/CAD 1.0829 H: 1.0878 L: 1.0827

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0678 1.0706 1.0775 1.0852 1.0906 1.1000
Click to enlarge
  • 1.0775 is providing support for the pair. This is followed by support at 1.0706, which has remained intact since early January.
  • 1.0852 has reverted to a resistance role as the pair trades at lower levels. 1.0906 is stronger.
  • Current range: 1.0852 to 1.0906

Further levels in both directions:

  • Below: 1.0775, 1.0706, 1.0678 and 1.06
  • Above: 1.0852, 1.0906, 1.10, 1.1094 and 1.1177

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in Wednesday trading, continuing the trend we saw a day earlier. This is not consistent with what the current movement of the pair, as the Canadian dollar has strengthened. The ratio has a majority of long positions, indicative of trader bias in favor of the US dollar reversing direction and posting gains.

USD/CAD has surrendered Wednesday’s gains. The US dollar is under strong pressure in the North American session.

USD/CAD Fundamentals

  • 12:30 Canadian Current Account. Estimate -$12.4 billion. Actual -$12.4 billion.
  • 12:30 US Preliminary GDP. Estimate -0.6%. Actual -1.0%.
  • 12:30 US Unemployment Claims. Estimate 321K. Actual 300K.
  • 12:30 US Preliminary GDP Price Index. Estimate 1.3%. Actual 1.3%.
  • 14:00 US Pending Home Sales. Estimate 1.1%. Actual 0.4%.
  • 14:30 US Natural Gas Storage. Estimate 110B. Actual 114B.
  • 15:00 US Crude Oil Inventories. Estimate -0.1M.

*Key releases are highlighted in bold

*All release times are GMT

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.