Data from Statistics Canada show that Canada’s economy grew by 1.2% on a monthly basis in August 2020, representing a more robust pace of growth than was expected. The markets had projected that the economy would grow by 0.9%. However, this was well short of July’s revised GDP that stood at 3.1%. This is perhaps why the USDCAD’s advance did not turn into a full-fledged decline on the day. The pair has only posted modest losses of 0.07% on the day as at the time of writing.
Statistics Canada notes that this figure represents the 4th month in a row that the Canadian economy expanded, allowing it to recover from the worst drops in economic activity that trailed the onset of the coronavirus pandemic and subsequent lockdowns in March and April. However, the 5% GDP growth recorded in February 2020 is yet to be attained. The report went on to say that “15 of 20 industrial sectors posted increases…in August.”
On the other side of the border, Personal Spending in the US climbed more than expected in September. Data from the Bureau of Economic Analysis showed a 0.9% increase in US Personal Income in September (monthly), versus the 0.4% that the markets expected. This figure represents a mild recovery from the 2.5% contraction seen in August.
Technical Outlook for USDCAD
The USDCAD ended yesterday by forming a doji candle. If the candle for today ends as a bearish candle on the daily chart, this sets up an evening star candlestick pattern. This candlestick pattern has bearish connotations and may signal that the bullish breakout from 1.32044 that completed the double bottom pattern may have met its projected target at the 1.34000 psychological resistance level.
This scenario sets up the possibility of further decline towards the 1,32458 support (highs of 9 September and 14 October acting in role reversal), with 1.32044 and 1.31501 forming the sequential downside targets. An outside day bearish candle that closes below 1.32458 will cement this outlook.
On the flip side, a break of 1.33487 allows 1.34656 to come into play before the 200-day moving average shows up as a resistance further north at 1.35499. Crude oil prices and Tuesday’s US elections will be the major fundamental drivers for the pair next week.
USDCAD Daily Chart