The Canadian dollar has enjoyed an excellent week, with gains of 1.0%. With key events on both sides of the border as we wrap up the week, we could see some strong movement from USD/CAD in the North American session.
The US dollar remains under pressure after the dovish FOMC meeting. Jerome Powell has stayed consistent with his message that the surge in US inflation is transitory. Powell was non-committal about a taper, saying that nonfarm payrolls would have to show substantial improvement before a September taper could be considered.
There are two key events later today which could have a significant impact on the movement of USD/CAD. Canada releases the GDP report for May. The consensus stands at -0.3%, a repeat of the April reading. This points to a lack of economic growth, as Covid continues to weigh on the economy. Over in the US, we’ll get a look at the Fed’s preferred inflation indicator, Core PCE Prices. A gain of 0.6% MoM is expected in June, up slightly from the previous reading of 0.4%.
US GDP, unemployment claim miss forecast
US data was a disappointment, and the major haves jumped on the greenback and sent it broadly lower. Advanced GDP for the second quarter rose 6.5%. This is certainly a sharp gain, but well short of the consensus of 8.5%. Unemployment claims also missed the consensus, as both initial and continuing claims were slightly higher than anticipated. The soft data dovetails with the Fed stance that there is no danger of the economy overheating and that monetary stimulus is required given the current economic conditions.
USD/CAD Technical
- USD/CAD faces a monthly resistance line at 1.2586. Above, there is resistance at 1.2741
- On the downside, the pair continues to test support at 1.2459. Below, there is support at 1.2352
