Canadian Dollar Drifting After U.S. GDP Beats Estimate, Euro Dips on Trade War Fears
USD/CAD
USD/CAD is trading sideways on Wednesday. In the North American session, the pair is trading at 1.3284, up 0.09% on the day.
U.S. GDP Punches Past 2.0%
The U.S economy showed stronger growth than expected in the third quarter. Second-estimate GDP increased at an annual rate of 2.1%, which was higher than the 1.9% estimate. Analysts had expected that this GDP reading would confirm the initial release of 1.9%, and the upward revision was a pleasant surprise for investors. Still, the Canadian dollar was unable to take advantage and has posted slight losses on Wednesday.
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Ahead – Canadian Current Account, GDP
With U.S. markets closed on Thursday, investor focus will shift to Canadian releases for the rest of the week. On Thursday, Canada releases current account balance. The current account deficit is expected to widen to C$9.5 billion in Q3, compared to C$64 billion in the second quarter. On Friday, Canada releases its monthly GDP report. The economy expanded 0.1% in August and an identical figure is expected in September.
Technical Analysis
There is immediate resistance at 1.3300. This line has proven surprisingly resilient, as it was last tested on October 9th. If the pair can break above this line, it has room to climb all the way to 1.3385, which is the next line of resistance.
On the downside, there is weak support at 1.3260. The 200-EMA and 50-EMA lines follow closely – the 200-EMA is at 1.3232 and the 50-EMA follows at 1.3220. Note that these lines appear headed to a crossover, which could signal a trend reversal.
EUR/GBP
EUR/GBP has posted losses on Wednesday, giving up the gains we saw on Tuesday. Currently, the pair is trading at 0.8536, down 0.40% on the day.
Euro Slips on Trade War Fears
The ongoing U.S.-China trade war has dominated the headlines for months, but there is trouble brewing between the U.S. and the EU as well. The U.S. announced that it is moving ahead with an investigation over a French digital tax, and will publish its findings next week. In the past, U.S. President Trump has expressed his unease with European trade practices and has hinted at imposing tariffs on European car manufacturers, which could have a severe impact on European car makers. There is growing concern that if the U.S. reaches a trade deal with China, Trump could aim his tariff crosshairs towards Europe.
Technical Analysis
The pair is showing stronger swings this week, but remains unable to pull away from the 0.8560 line, which has remained relevant since mid-November. Above, we find immediate resistance at 0.8590, followed by resistance at 0.8700. On the downside, 0.8500 is a major support level.