Global macro overview for 01/09/2017:
The recent Canadian GDP data has beaten market expectations. Quarterly Gross Domestic Product Annualized data was better than an expected 3.7% rise because GDP showed the 4.5% expansion. Moreover, on a monthly basis, Canadian GDP rose 0.3% for June following a 0.6% increase for May which was again above consensus of a 0.1% gain for the month. It was the eighth successive quarterly gain. The biggest expansion was noted in goods-producing industries that rose 0.7% to give 7.7% year-on-year growth. The construction sector rose 2.0% together with retail sales. The biggest contraction was noted in oil and gas sector and wholesale sales.
This kind of data will likely make the Bank of Canada confident in the growth outlook, but the uncertainties are growing. The biggest concerns are related to exports, especially with a stronger Canadian Dollar. Moreover, the NAFTA negotiations also a complicating factor as Trump's administration is threating to cancel the agreement. On the other hand, the domestic concerns are most visibly related to housing sector which could have a wider impact on the economy if there is a sustained slowdown. Any negative developments this parts of the economic sectors will likely lead to further appreciation of the Canadian Dollar, which might prevent the Bank of Canada from hiking the interest rates again this year.
Let's now take a look at the USD/CAD technical picture on the H4 time frame. The bulls have tried to regain the control over the market, but as soon as the market went into overbought territory, the down trend has resumed. Currently, the price is testing the technical support at the level of 1.2456 again (fifth time). In a case of a breakout, the next technical support is seen at the level of 1.2411 and 1.2380.
