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Loonie at 1.2900 again

Market Analysis

USDCAD, H1

Following the Canada GDP miss, and softer IPPI prices, USDCAD was lifted from 1.2840 to 1.2914. Canada GDP fell 0.1% in August after the flat reading in July. The decline was contrary to expectations for a pick-up in growth during August. Good sector output fell 0.7% while service sector output grew 0.1%. The goods sector was dragged lower by a 1.0% drop in manufacturing and a 0.8% tumble in mining, quarrying and oil and gas extraction. The pull-back in August GDP leaves the economy with no growth for two months, the presence of temporary factors suggests total GDP will resume growth in September.

Nevertheless, Canada industrial product price index declined as well at 0.3% in September (m/m, sa) after the revised 0.4% gain in August (was +0.3%). Higher prices for energy and petroleum product prices (+4.4%) were more than offset by declines across the other sectors. The exchange rate exerted a large influence, as a strong appreciation in the loonie versus the U.S. dollar drove the IPPI lower in September — the IPPI excluding the exchange rate was up 0.3% (m/m, sa).

The USDCAD, on the announcement of the data earlier, came within 2 ticks of Friday’s 3.5 month high of 1.2916. The pair is in a uptrend since Early September. Despite the choppy sideways ranging the last 4- days, significant is the fact that it managed to hold above 1.2780 since Thursday, making Daily higher lows on the upper Bollinger Bands pattern.  The Daily Stochastic remains above 80, while the rest of the momentum indicators such as MACD and RSI rolling positively nearly in all time-frames, longer or shorter ones, suggesting that upwards momentum is likely to continue.

Additionally, a possible break above the latest high Fractal at 1.2920, will bring the 200-day moving average of 1.3007 into focus.

 

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Andria Pichidi

Market Analyst

HotForex

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