USD/CAD reversed from key support

ADP, US GDP, Chicago PMI and Canadian GDP – all numbers exceeded expectations. Which currency will outperform? Let’s try to find out.

Fundamentals

The day was full of economic releases. The Canadian GDP m/m came out better than analysts expected: 3.0%, while the forecast was 2.9%. Besides, the US GDP q/q contracted by 31.4% in the second quarter, but still beat estimates of -31.7%. After the report the Canadian dollar surged, pushing USD/CAD to the downside.

Moreover, US Chicago PMI turned out 62.4, while only 52.0 was anticipated. What’s more important, the ADP report came out 749 000, which was better than estimates of 650 000. This data is generally used to predict NFP numbers, which will be out on Friday. As a result, it underpinned the USD.

Technical tips

If we look at the 4-hour chart, we’ll notice that USD/CAD has been trading in a horizontal corridor for over a week. There is the strong support at the intersection of the bottom of that range and the lower trend line at 1.3360. The pair is unlikely to break it. Moreover, the strong USD should eventually outrace the loonie. The move above the resistance of 1.3415 will drive the price to the next round number at 1.3500. Support levels are 1.3360 and 1.3300.

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Kseniya Medik