Yesterday’s trade saw USD/CAD within the range of 1.2507-1.2678. The daily high has also been the highest level since March 18th 2009, when a high of 1.2755 was recorded. The pair closed at 1.2617, gaining 0.64% on a daily basis.
At 9:20 GMT today USD/CAD was up 0.28% for the day to trade at 1.2652. The pair broke the first key weekly resistance level and touched a daily high at 1.2663 at 9:05 GMT.
Fundamentals
United States
Gross Domestic Product – preliminary estimate
The preliminary estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 3.3% in the fourth quarter of the year. The final GDP estimate for Q3, reported on December 23rd, pointed to an annual growth of 5.0%. The latter has been the highest growth rate since Q3 2003, which reflected an upturn in consumer spending and investment. Real personal consumption expenditures rose 3.2% in the third quarter, compared to a 2.5% increase in Q2. Real non-residential fixed investment increased 8.9% in Q3, following an increase of 9.7% in the second quarter. Real exports of goods and services were up 4.5% in the third quarter, compared to an increase of 11.1% in Q2, while real federal government consumption expenditures and gross investment expanded 9.9%, after a decrease of 0.9% in the second quarter, according to data by the US Department of Commerce.
In quarterly terms, US economy probably expanded 1.0% in Q4, following a final growth rate of 1.4% in Q3, which was reported on December 23rd.
The report on GDP is closely watched by traders, operating in the Foreign Exchange Market, as they will look for higher rates of growth as a sign that interest rates may follow the same direction. Higher interest rates will attract more investors willing to purchase assets in the US, which will increase demand for the US dollar. If an economy is experiencing a robust rate of growth, the benefits will eventually affect the end consumer, because of the increased likelihood of spending. Furthermore, through increased consumer expenditures the economy has the potential to expand even more. In case the preliminary GDP estimate outpaced expectations, this would certainly heighten the appeal of the greenback. The preliminary data is due out at 13:30 GMT.
Employment Cost Index
Employment Cost Index (ECI) in the United States probably rose 0.6% during the fourth quarter of the year compared to Q3, following another 0.7% gain in Q3 compared to Q2. This index measures the change in the price of labor, defined as compensation per employee hour worked. It shows changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. The ECI is considered as an indicator, reflecting cost pressures within companies that could trigger price inflation for finished goods and services. A larger than expected rate of increase would generally provide a certain support to the US dollar. The Bureau of Labour Statistics is to release the quarterly data at 13:30 GMT.
Reuters/Michigan Consumer sentiment index
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States continued to improve in January. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, probably confirmed the preliminary index value of 98.2, reported on January 16th. If so, this would be the highest index value since January 2004. In December the gauge of confidence came in at a final reading of 93.6. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.
According to preliminary data, the sub-index of current economic conditions increased to a reading of 108.3 in January from a final 104.8 in December, after in January 2014 it came in at 96.8. The sub-index of consumer expectations came in at a reading of 91.6, up from a final value of 86.4 in December and a final 71.2, registered in January 2014.
In case the gauge of consumer sentiment showed a larger improvement than projected, this would boost demand for the US dollar. The final reading is due out at 15:00 GMT.
Canada
Gross Domestic Product
Canadian Gross Domestic Product (GDP) probably showed no change in November compared to October, according to the median forecast by experts, following a 0.3% expansion in October compared to September.
In case Canada’s growth outpaced expectations, this would have a positive effect on the Canadian dollar. Statistics Canada is expected to release the official figure at 13:30 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.2601. In case USD/CAD manages to breach the first resistance level at 1.2694, it will probably continue up to test 1.2772. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2865.
If USD/CAD manages to breach the first key support at 1.2523, it will probably continue to slide and test 1.2430. With this second key support broken, the movement to the downside will probably continue to 1.2352.
The mid-Pivot levels for today are as follows: M1 – 1.2391, M2 – 1.2477, M3 – 1.2562, M4 – 1.2648, M5 – 1.2733, M6 – 1.2819.
In weekly terms, the central pivot point is at 1.2269. The three key resistance levels are as follows: R1 – 1.2607, R2 – 1.2795, R3 – 1.3133. The three key support levels are: S1 – 1.2081, S2 – 1.1743, S3 – 1.1555.
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