Technical Bias: Slightly Bullish
- USDCAD retakes 1.2500, climbing 0.7% to 1.2518.
- The pair is looking to re-test the Q1 high of 1.2518, according to TD Securities and Westpac.
- Canada GDP shrank 0.1% in Q1 and 0.6% annually.
- US GDP contracted 0.7% annually in Q1, according to revised estimates.
The USDCAD resumed its upward momentum on Friday, clinching 1.25 and looking at higher ground following disappointing GDP figures.
The USDCAD tested Thursday’s highs, climbing to 1.2529 in the early New York session. The pair would subsequently consolidate at 1.2518, advancing 0.7 percent. The pair’s initial resistance is 1.2540, the high from Thursday. Initial support is likely found at the psychological 1.2400 level.
The USDCAD is up nearly 2 percent on the week and is looking to re-test the first quarter high of 1.2817, according to several independent analysts like TD Securities and Westpac. The pair’s fundamental estimate is around 1.23-1.24, but is expected to enjoy bigger momentum as the US dollar continues to gather pace.
Canada’s Economy Shrinks in Q1
The Canadian economy shrank in the first quarter for the first time since 2011, as the oil price shock weighed on economic output in the goods-producing sector.
Canada’s gross domestic product (GDP) – the value of all goods and services produced in the economy – shrank 0.1 percent in the first three months of the year following growth of 0.6 percent in the fourth quarter of 2014, the federal statistics department reported on Friday.
Expressed in annualized terms, GDP contracted 0.6 percent in the first quarter.
On a monthly basis, Canada’s GDP shrank 0.2 percent in March, official data showed.
Industries like oil and gas extraction, mining, construction, manufacturing and wholesale trade were in negative territory in the first quarter. There was growth in finance, utilities and agriculture, but not enough to offset declines elsewhere.
US GDP Contracts in Q1
The US economy contracted by a wider margin in the first quarter, the Commerce Department said in a revised estimate. US GDP shrank 0.7 percent annually in the first three months of the year after an initial estimate showed tepid 0.2 percent growth. The contraction was expected, with a median estimate of economists calling for a 0.8 percent decline.
A disappointing first quarter likely means the US economy will fail to grow more than 3 percent in 2015. The latest downgrade was mostly attributed to a wider trade deficit and smaller business inventories, dampening the demand outlook for the rest of the economy.