USD/CAD Returns Higher Despite Improved Canada GDP Numbers

USD/CAD has been bullish for most of January and despite the retreat this week, buyers returned again yesterday and it closed the month on the bullish foot. The positive GDP report from Canada didn’t help the CAD much and late in the day this pair jumped 80 pips higher, following the FOMC meeting which leaned on the hawkish side, giving the USD a boost.

This forex pair turned higher at the beginning of last month and has been forming a bullish trend this month, with moving averages serving as support. But, buyers failed twice at the 1.3530-40 level, which formed a resistance zone and the price retreated. Yesterday the retreat accelerated after the Canadian GDP figures which were quite positive, as shown below:

November Canadian GDP and the advance December Reading

• November GDP +0.2% vs +0.1% expected
• October GDP was 0.0%
• The advance reading for November was +0.1%
• Service producing industries +0.1% vs +0.1% prior
• Goods producing industries +0.6% vs 0.0% prior
• December advanced reading +0.3%
• Prelim Q4 estimate +0.3%
• Prelim 2023 estimate +1.5%

Manufacturing for non-durable goods rose by 1.2% which is the fastest pace of expansion in 7 months, while the three subsectors also showed positive performance, contributing to the increase. Chemicals were the strongest sub-sector, expanding by 1.9% that month. The reopening of car plants following October’s strikes was also beneficial for the industry.

Now the Bank of Canada is less inclined to raise interest rates in Q1 after such figures. We might have to wait until June for the initial cut, especially with the advanced reading showing a 0.3% expansion in December. This is bullish for the CAD which was displayed by the 70 pip dive, but every forex pair has two sides of the coin, and the USD price action is driving this pair. So, a bullish reversal followed toward the end of the day and the GDP decline was erased. Now, buyers are again in control in USD/CAD .

USD/CAD Live Chart