Today we got preliminary Q1 GDP data from the US and March GDP data from Canada. Both were somewhat disappointing, but more so with the Canadian data. The thing is, both data points are a bit outdated since the Fed and the BoC already acknowledged the slowdown in Q1 and remained optimistic. Let’s briefly look at the data points and take a look at how the USD/CAD is digesting them.
Preliminary US GDP q/q (Q1, Annualized): -0.7%
Advanced Q1 Estimate: 0.2%
Q4 2014 (annualized): 2.2%
Canada GDP m/m (March): -0.2%
February: -0.1% (revised from 0.0%)
The Canadian GDP was more of a surprise because economists forecast a positive reading. Still, the BoC has shifted the market’s attention to Q2 data, so the disappointing should not be that dramatic. The US data does not look like a deterrent to recent USD-strength, which is anchored on the FOMC’s optimistic outlook and the projection of a September rate hike.
Let’s take a look at the USD/CAD
The USD/CAD was bullish coming into this week and did flatten out ahead of the GDP data. We can see that the 1H RSI held above 40, which reflects maintenance of the bullish momentum.
After the GDP data, the pair bounced off of 1.24 and the 100-hour SMA, climbing back above the 50-hour SMA. This signals bullish continuation, with the 1.2538 high under pressure. A failure to break this high and a return below 1.2390 would introduce a short-term bearish correction outlook. Otherwise, the USD/CAD has upside risk towards the 1.2665 resistance pivot and the 1.2834 high on the year as we can see in the daily chart below:
Note that a break above the 1.2538 high would also clear a falling trendline from the 1.2834 high, another reason to anticipate the revival of a bullish market.
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