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USDCAD Capped by 1.34 Ahead of US GDP at 830am ET

Published October 28, 2016
  • USDCAD is steady and trading in a very tight range just shy of the 1.34 handle this morning as the market awaits US Q3 GDP figures at 830am ET
  • On an annualized basis, economists are expecting the US economy to have grown at a 2.5% rate during Q3
  • This would be the first quarter since Q3 2015 that growth has exceeded 2%; some are looking for today's report to post a 3.3% annualized pace
  • There have been high expectations for the US economy for some time now, with little to show for it…
  • …however, US Q3 economic data was rather strong with the economy adding an average of 191k jobs per month, ISM manufacturing averaging a reading of 51.8 per month which is the highest average since Q2 2015, and new home sales averaging 587k units per month which is the best quarterly pace since the 2008 financial crisis
  • All in all, this data leads us to believe that a strong GDP report is a high probability this morning
  • A print at or above 2.5% should support USD and solidify any lingering doubt regarding a Fed hike this December
  • Conversely, a print below 2.5% could see the current bull run for the greenback take a pause
  • We suspect that a number sub 2% is necessary for the market to really put the brakes on the possibility of a Fed rate hike
  • From a technical perspective, resistance lies at 1.3400, 1.3455, 1.3575 and 1.3835 while support comes in at 1.3295, 1.3000 and 1.2850

Charts: (1) USDCAD and US-CA 2-year spread both move higher. (2) US 2/10-year yields break out as economy improves. (3) Fed rate hike odds. (3) Economic Calendar.