USD/CAD drops to test 1.3000 on Canadian GDP, weaker USD
James Chen, CMT January 31, 2017 8:32 PM
- Canada’s Gross Domestic Product (GDP) for November 2016 reported better-than-expected at +0.4% against forecast of +0.3%. Canadian dollar surged, pressuring USD/CAD to dip below key 1.3000 psychological support on Tuesday.
- USD/CAD also pressured by US dollar’s continued weakening on Tuesday, driven partly by US protectionist stance and Trump Administration “talking down” the dollar while boosting “grossly undervalued” euro.
- Crude oil prices in flux but still currently supported on strength of December’s output cut deal among major OPEC/non-OPEC oil producers. Support for crude oil generally lends a measure of support for oil-linked Canadian dollar.
- Bank of Canada recently stated that a rate cut was still “on the table,” partly due to Trump’s protectionist stance and expected renegotiation or dissolution of the North American Free Trade Agreement (NAFTA).
- Federal Reserve policy decision on Wednesday will help determine near-term direction for the US dollar when the Fed reveals its current interest rate outlook in view of the new Trump Administration’s fiscal stimulus plans.
- Friday’s US jobs report will also be a major driver of short-term US dollar direction. Current forecast: 170,000 jobs added in January.
- USD/CAD fluctuating around critical 1.3000 support juncture ahead of Fed decision and US jobs report. A US dollar rebound from this support on a hawkish Fed and/or better-than-expected jobs data could lead to a USD/CAD upsurge, potentially towards the 1.3400 intermediate resistance target. Any sustained breakdown below 1.3000 on further US dollar weakness should target key support to the downside at 1.2800.
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