- Canada’s economy grew at an annualized rate of 0% in Q4, justifying the BoC’s moratorium on rate hikes.
- US house prices fell and the US dollar remained weak.
- USD/CAD Price Analysis: A close above 1.3600 guarantees further upside.
USD/CAD heads towards the 1.3600 figure and the US dollar (USD) registers some losses after dismal economic data reported from Canada. Moreover, market sentiment worsened as US stocks opened in the red. At the time of writing, USD/CAD is trading around 1.3610.
Canada’s GDP flat, tailwind for USD/CAD
Statistics Canada has released its Gross Domestic Product (GDP) for the fourth quarter. This was expected to be 2.9% of QoQ, but was below expectations and leveled off at 0%. The slowdown in fourth-quarter growth was due to inventory build-up and lower capital spending, particularly in machinery and equipment, according to the agency.
The numbers are negative, but the pressure from the Bank of Canada (BoC) will ease. The BoC announced a moratorium on rate hikes at its last monetary policy meeting. The US Federal Reserve (Fed) is expected to continue its tightening cycle and financial market speculation that the Fed could rise to 6% continues, according to Bank of America (BofA). , which in turn guarantees a further rise in USD/CAD. global research.
USD/CAD jumps after data release to record high of 1.3609. Nonetheless, the dust settled and the major retreated towards his 1.3590s area.
On the US front, monthly house prices fell 0.1% month-on-month in December, according to data released by the US Federal Housing Finance Agency on Tuesday. At the same time, the S&P/Case-Shiller Home Price Index rose 4.6% year-on-year in his December, down from 6.8% in November and below analyst estimates of 6.1%.
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USD/CAD Technical Analysis
The USD/CAD daily chart shows the pair is biased upwards after bottoming out around 1.3200. After falling to year-to-date lows of 1.3262, USD/CAD has prolonged its rally, surpassing key resistance areas such as the 20-, 50- and 100-day exponential moving averages (EMAs). Therefore, interest rate differentials and technical momentum could pave the way for further upside.
The next resistance for USD/CAD will be the daily high at 1.3609. The latter breach exposes the YTD high at 1.3685 ahead of 1.3700, followed by the November 3rd swing high of 1.3808.