CAD  – USD/CAD continues to stabilize, heading towards the 1.40 level

Data released Friday showed that Canada's gross domestic product (GDP) grew 0.2% month-over-month in July, rebounding from three consecutive months of contraction, driven by mining, manufacturing, and wholesale trade. Canada's GDP contracted 1.6% on an annualized basis in the second quarter, and economists are closely watching July's GDP growth data for signs of a contraction in the third quarter. Two consecutive quarters of contraction are considered a technical recession. Statistics Canada said preliminary estimates suggest the economy will likely not grow in August, but will avoid a contraction, with growth in services-producing sectors likely to be offset by gains in goods-producing sectors. Preliminary estimates are not always accurate and are subject to change. Money market traders are pricing in a 50-50 chance of a 25 basis point rate cut and no change in the Bank of Canada's interest rate in October.

The USD/CAD pair's recent trend appears to be based on the 50-day moving average (MA) as a key dividing line. After months of pressure from this indicator, the exchange rate broke through it in late July and has since found support at the 50-day MA multiple times, currently at 1.3770. However, a clear break below this level could lead to further downward pressure. The rising RSI and Stochastics oscillator on the chart suggest USD/CAD still has upward momentum in the near term. The support is expected at 1.3830 and 1.36, with significant support around 1.35 and possibly 1.3418. The resistance will be seen at 1.3960 and the 250-day MA at 1.40, followed by 1.42.

Forecast range:
Resistance: 1.3960 - 1.4000* - 1.4200
Support: 1.3830 - 1.3600 - 1.3500 - 1.3418

Any questions? contact our professional analysis team