USD CAD Technical Analysis - USD CAD Trading: 2015-09-30

Anticipating Canadian GDP monthly release

Market participants anticipate the GDP growth in Canada has slowed in July. Slowing economic growth is a negative development for Canadian currency. Will the Canadian dollar weaken as the GDP growth slows down?

The Bank of Canada cut its benchmark interest rate twice in 2015 to provide a monetary stimulus to faltering economy as the slump in energy prices resulted in lower investment in energy sector and demand for Canadian exports fell with slowing growth in Canada’s main trading partners US and China. The Bank of Canada left the interest rate unchanged at its last meeting in September. The monetary easing helped reverse the downtrend in GDP which grew 0.5% in June month-over-month, recording the first positive monthly growth since the start of 2015 and slowing the pace of GDP contraction in the second quarter to 0.5% annualized rate from 0.8% in the first quarter. The upcoming report on Wednesday by Statistics Canada is expected to indicate the growth is slowing again with the GDP in July recording 0.2% growth month over month. This is a bearish development for Canada’s currency unless the actual figure turns out higher providing support for Canadian dollar.

The USDCAD had been consolidating on daily timeframe in a roughly symmetrical triangle in the weeks before the Federal Open Market Committee meeting on September 16 -17. The pair broke below the triangle as Federal Reserve didn’t raise the interest rates, but then started rising again after several Federal Reserve policy makers indicated the central bank may still raise the rates this year. The Parabolic indicator has formed a buy signal. The slope of the Donchian channel indicates upward movement. The RSI-Bars oscillator also confirms the uptrend. We expect the bullish momentum will continue after the price closes above the last fractal high at 1.34157, confirmed also by the upper Donchian channel. A pending order to buy can be placed above that level, with the stop loss below the last fractal low at 1.30959. After placing the pending order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level without reaching the order, we recommend cancelling the position: the market sustains internal changes which were not considered.