FXStreet (Mumbai) – The Canadian dollar extends its bullish momentum versus its American counterpart into a third-day on Friday, pushing USD/CAD closer towards post-FOMC lows struck below 0.31 handle. Heading into the Canadian GDP report, the loonie remains bid on the back of a minor rebound in oil prices while a broadly lower US dollar also continues to weigh on the USD/CAD pair. Canada’s GDP data for August will be published at 12.30GMT.
Little action expected on the GDP release
The Canadian GDP is expected to expand 0.1% in August, after hiking 0.3% during July. The marginal rise expected in the growth numbers is not expected to trigger aggressive market reactions.
Krishen Rangasamy, economist at National Bank of Canada, noted, “Monthly reports so far showed that manufacturing and wholesale were down in real terms. But, it is more complicated this month. Sales were down, yet inventories were up in both reports. This leaves us to believe that even though they didn’t sell a lot, production was probably up. So output did better than sales in these industries. There is a possibility that [the sector] may have contributed to growth based on energy export volumes figures from August. If they exported a lot, maybe they produced a lot as well, but they could have exported out of inventories.”
While analysts at TDS expect, “to see a further rebound in the extraction sector while momentum in retail volumes will help to offset a softer month in the wholesale and manufacturing sector. For the quarter as a whole, we continue to see annualized real GDP growth tracking around 2.5% though some models are pointing to an even faster rate of growth. Recall the Bank of Canada revised its Q3 forecast to 2.5% in its October MPR released last week.”
USD/CAD: Key levels to watch on data
The pair remains pressured around 1.3140 levels and on above estimates Canada’s GDP print, the prices could fall further towards the immediate support in sight at 1.3106/1.3100 (100-DMA/psychological levels). Selling pressure will intensify below the last, dragging the pair towards 1.3086 (Oct 28 Low) and below that 1.3053/37 (20-DMA/ Oct 23 Low) could be exposed. Should the data miss estimates, the prices could rebound higher towards the resistance placed at 1.3186/91 (5-DMA/1h 100-SMA), above which 1.3275/81 (Oct 27 & 28 High) could be tested. A breach of the last would open doors for a test of 1.3300 (psychological levels).
(Market News Provided by FXstreet)