Canadian Dollar Weakens as GDP Growth Disappoints - Implications for Bank of Canada

Forex

Traders' Opinions

Summary:

The Canadian Dollar (CAD) faced significant headwinds as unexpected weak economic growth figures for June and the second quarter were reported. The GDP in June showed a 0.2% decline, marking a shift from the 0.2% growth reported in the previous month. The second quarter's GDP growth was stagnant...

SELL EURCAD

Close Time

CLOSED

1.46000

Entry Price

1.44500

1.47500

1.48012 +0.00470 +0.32%

28.7

Pips

Profit

1.44500

1.45713

Exit Price

1.46000

Entry Price

1.47500

Canadian Dollar Faces Headwinds Amid Weak GDP Growth

The Canadian Dollar (CAD) found itself on shaky ground as unexpected economic data sent ripples through the financial markets. Statistics Canada's report on GDP growth for June revealed a 0.2% decline, a stark contrast to the 0.2% growth witnessed in the previous month. However, the concern didn't end there. When looking at the second quarter's GDP growth on a quarter-on-quarter basis, the numbers were even more disappointing. Expectations were set at 0.3% growth, but the reality was a flat GDP, down from the first quarter's 0.6% expansion.

Several factors contributed to this weakness in GDP growth. Firstly, higher interest rates had already started to weigh on economic activity. Additionally, 'temporary' factors, such as a federal workers' strike in April, further disrupted the growth trajectory. Labor market data didn't provide much comfort either, with the unemployment rate increasing by half a percent over the past three months.

Consumer Delinquency Rates on the Rise

Adding to the concerns, consumer delinquency rates in Canada have been on the rise, as reported by Statistics Canada. This raises questions about the overall financial health of the Canadian population and its potential impact on the broader economy.

Bank of Canada's Response and Impact on the CAD

The weak GDP data has immediate implications for the future policy of the Bank of Canada (BoC). Many experts suggest that this disappointing economic performance could lead the BoC to reconsider its path of interest rate hikes. This, in turn, may lead to expectations that further rate increases will not be necessary to control inflation.

Nathan Janzen, Assistant Chief Economist at the Royal Bank of Canada, has indicated that the BoC may pause on further rate hikes. This sentiment, if realized, could result in a neutral to negative outcome for the CAD, as it could potentially lose its attractiveness to investors seeking higher returns in a rising rate environment.

Inflation Remains a Factor

Despite the weak GDP data, inflation in Canada remains higher than the BoC's target. This complicates the central bank's policy decisions, as it needs to balance economic growth concerns with its inflation-fighting mandate.

Market Reaction and Technical Analysis

The news of the weak Canadian GDP data had an immediate impact on the currency market, causing the CAD to weaken. The EUR/CAD pair rose, influenced not only by the Canadian data but also by the news of US unemployment, which confounded technical analysts' calculations.

Technically, the EUR/CAD pair's arrival at 1.48 is seen as a large overbought area, suggesting a correction may be on the horizon, potentially reversing the trend. As of the latest data, the EUR/CAD pair closed at 1.464, with chart analysis pointing to 1.445 as a potential target.

Conclusion

The unexpected weakness in Canadian GDP growth has raised significant concerns about the country's economic prospects. It has also put the Bank of Canada in a delicate position, as it seeks to balance the need for economic stimulus with its mandate to control inflation. Investors and market participants will be closely monitoring the central bank's next moves, as they could have a substantial impact on the trajectory of the Canadian Dollar and the broader economy. The days ahead promise to be crucial for understanding the CAD's future direction.

TRADE RECOMMENDATION

SELL EURCAD

ENTRY PRICE : 1.4600

STOP LOSS : 1.4750

TAKE PROFIT : 1.4450

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Forex

Traders' Opinions

Summary:

The U.S. labor market, once a pillar of economic strength, is showing signs of slowing growth, leaving financial markets in a state of uncertainty. In August, despite strong headline figures of job creation, concerns arose due to sluggish wage growth and an unexpected increase in the unemployment rate...

BUY USDX

Close Time

CLOSED

104.600

Entry Price

106.500

103.500

107.750 -0.420 -0.39%

36.8

Pips

Profit

103.500

104.968

Exit Price

104.600

Entry Price

106.500

The August Data Dilemma

August's employment report brought both positive and concerning news. On the surface, the non-farm payroll data appeared robust, with 187,000 jobs added, surpassing market expectations. However, beneath the surface, issues emerged as average hourly earnings grew by a meager 0.2% month-on-month, lower than anticipated and half of the previous month's growth.

The most significant jolt came from the unexpected rise in the unemployment rate, climbing from 3.5% to 3.8%. This turn of events led to a weakening U.S. Dollar, as investors recalibrated their expectations regarding future Fed interest rate hikes, possibly even contemplating an eventual rate cut.

Market Sentiment and the Pound-Dollar Exchange Rate

The market reaction was swift but nuanced. The Pound to Dollar exchange rate initially rallied but soon stabilized, indicating that the overall impact of the data may not be a game-changer.

Analyzing the Dollar's Trajectory

While the U.S. Dollar had enjoyed a strong rally over the past six weeks, driven by robust economic data, analysts at HSBC believe its path ahead may become more challenging. This challenge is primarily attributed to the substantial movement in yields.

For a meaningful reversal of the U.S. Dollar's strength, expectations for rate cuts must increase significantly, yet the Federal Reserve appears cautious about such a move.

The Changing Landscape of the Labor Market

The apparent slowdown in labor market growth, coupled with revisions to previous reports and the uptick in the unemployment rate, raises questions about the trajectory of the Fed's rate-hiking cycle. It's increasingly plausible that the Fed may pause its rate hikes and adopt a holding pattern, especially if economic data remains stable.

It's worth noting that the effects of rate increases on the real economy typically take time, potentially between 12 months to two years.

Looking Forward: Challenges and Strengths

Despite these concerns, the U.S. labor market remains a source of strength for the economy, making a recession at this stage unlikely. The challenge now is to maintain economic momentum as inflation levels become more manageable.

The Dollar's Technical Outlook

Technical analysis of the U.S. Dollar (DXY) reveals an intriguing pattern. Since hitting a low in July 2023, the DXY has steadily climbed from the base of a descending channel. It attempted a breakout in mid-August and finally succeeded in early September, primarily driven by the NFP fundamentals.

The DXY is now poised for an upside swing, potentially targeting a yearly high in 2023. Adequate support from key moving averages suggests a bullish outlook.

In conclusion, the U.S. labor market's evolving dynamics present both challenges and opportunities for financial markets. The future direction of the U.S. Dollar remains uncertain, but the broader economic landscape indicates resilience despite the headwinds. Investors and analysts will closely monitor upcoming economic data and Fed decisions to gain insight into the path forward in this dynamic financial environment.

TRADE RECOMMENDATION

BUY DXY

ENTRY PRICE : 104.600

STOP LOSS : 103.500

TAKE PROFIT : 106.500

Risk Warnings and Disclaimers

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Jason

Summary:

The dollar rebounded sharply because the non-farm payrolls were less than expected, which increased the market's expectation of a Fed rate hike in November. This expectation will affect the dollar in the short term. However, although the dollar is on a rising trend in the near term, investors are advised not to go long on it at present.

SELL USDX

Close Time

CLOSED

104.500

Entry Price

104.000

104.800

107.750 -0.420 -0.39%

30.0

Pips

Loss

104.000

104.804

Exit Price

104.500

Entry Price

104.800

Fundamentals

The U.S. dollar oscillated at high levels and closed down 0.1% on Monday after a sharp rise following the non-farm payrolls last Friday. Looking at the last three non-farm payrolls reports, to the demand side in the labor market, the employment was revised sharply downward, the wage growth fell month-on-month, and the JOLTS quits decreased, while to the supply side, the improving labor force participation rate drove the unemployment rate to its highest level in a year and a half. All show that the job market has cooled overall.

While there was a slowdown in the labor market, it was not as optimistic as the market thought. In addition to the reduction in state and local government education jobs due to school vacations, there were one-off factors contributing to the across-the-board cooling. It remains to be seen whether the improvement in labor supply on the household front can be sustained.

The dollar's sharp rally was due to this (less than expected). For the moment, as the non-farm payrolls disappointed the market, it also increased the market's expectation of a Fed rate hike in November. This expectation will affect the dollar in the short term.

Technical Analysis

In the 4-hour timeframe, the dollar is volatile in a wide range, with the strong resistance at 104.4, and the key resistance at the 0.236 Fibonacci retracement level (104.7). Breaking above this level, the dollar will rise further. The key support is at the 0.382 Fibonacci retracement line (103.95). Breaking this line, the dollar will move down to test 103.0, the bottom of the oscillation range.

As for indicators, STS shows clear signs of upward movement; in the Ichimoku Cloud, the turning line accelerates upward, and is running away from the baseline; in the DMI, +DI moves against -DI, and -DI is near 18 and below +DI. Indicators all show that the dollar will first retrace downward. Overall, although the dollar is on a rising trend in the near term, investors are advised not to go long on it at present.

USDX: Bullish on Dollar, but Not to Long in the Near Term_1

Trading Recommendations

Trading direction: Short

Entry price: 104.5

Target price: 104.0

Stop loss: 104.8

Support: 103.95, 103.6, 103.3

Resistance: 104.4, 104.7

Risk Warnings and Disclaimers

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Warren Takunda

Forex

Traders' Opinions

Summary:

The GBPAUD exchange rate has been a focal point for forex traders recently, with a notable pullback from its 2023 high of 1.9971 to its current level of 1.9529. As we delve into the dynamics behind this movement, it becomes apparent that several crucial factors are influencing its trajectory.

BUY GBPAUD

Close Time

CLOSED

1.94000

Entry Price

2.00000

1.92000

1.97607 +0.00645 +0.33%

200.0

Pips

Loss

1.92000

1.91995

Exit Price

1.94000

Entry Price

2.00000

Support from Key Levels:

GBPAUD: Pullback from 2023 High Amid Shifting Dynamics_1

Despite the pullback, there is a sense of support around the current GBPAUD levels. This suggests that a period of stabilization might be on the horizon. Importantly, the broader trend continues to favor GBP/AUD upside, as the exchange rate remains positioned above significant moving averages. This leads many analysts to perceive the recent pullback as a countertrend rebalancing, with expectations that the uptrend may resume in due course.

China's Influence on the Australian Dollar:

One of the primary drivers behind the recent strength of the Australian Dollar (AUD) is improved sentiment towards China. Chinese policies aimed at boosting the economy, particularly in the housing sector, have sparked a positive impact on Chinese stocks and commodities. This, in turn, has aligned with the performance of the AUD, which has a strong connection to China's housing and infrastructure sectors due to the substantial demand for Australia's raw material exports.

RBA's Policy Decision and Its Implications:

The upcoming policy decision from the Reserve Bank of Australia (RBA) is a critical event to watch for anyone interested in the GBPAUD exchange rate. While market consensus suggests that the RBA will maintain interest rates at their current levels, any indication of potential future rate hikes could significantly strengthen the Australian Dollar. As such, the RBA's policy stance will be a pivotal factor in shaping the currency pair's future.

Inflation and Labor Market Trends:

Within Australia, there are intriguing developments in inflation and the labor market. Inflation is showing signs of slowing, while the labor market remains notably tight. This dynamic could lead to increased unit labor costs and inflationary pressures. Investors are closely monitoring these trends, as they can have a considerable impact on the GBPAUD exchange rate.

TRADE RECOMMENDATION

BUY GBPAUD

ENTRY PRICE: 1.94000

STOP LOSS : 1.9200

TAKE PROFIT : 2.000

Risk Warnings and Disclaimers

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Warren Takunda

Forex

Traders' Opinions

Summary:

The GBP to NZD exchange rate, which has been on a multi-month uptrend, recently hit a seven-year high before experiencing a short-term pullback. This article examines the factors behind this retreat, explores the technical analysis, and discusses upcoming events that could influence the GBP to NZD pairing.

BUY GBPNZD

Close Time

CLOSED

2.10500

Entry Price

2.18000

2.08000

2.19939 +0.00736 +0.34%

96.9

Pips

Loss

2.08000

2.09531

Exit Price

2.10500

Entry Price

2.18000

The Uptrend and Recent Retreat

The GBP to NZD exchange rate (GBPNZD) has been on a remarkable uptrend over the past few months, offering investors an attractive opportunity. However, this bullish run hit a snag recently, prompting a short-term retreat.

On August 21, GBPNZD reached a seven-year high at 2.1586, marking a significant milestone in its impressive ascent. This historic peak was followed by a market correction, a common occurrence after such rapid climbs.

Confirming Momentum

Despite the retreat, GBPNZD remains comfortably above key moving averages, signaling that the overall momentum remains bullish. This confirmation suggests that further advances could be on the horizon, although a period of consolidation and retracement should be expected in the short term.

One important technical indicator to note is the 50-day moving average, which historically has acted as a significant support level during pullbacks. While the exchange rate is currently distant from this trendline, it may serve as a key point of reference if the pullback continues.

Challenges for AUD and NZD

The article also highlights challenges facing the Australian Dollar (AUD) and the New Zealand Dollar (NZD). These challenges include concerns about their interest rate cycles, carry advantages, and China's economic situation. Such challenges could potentially weaken these currencies, further supporting the GBP.

Upcoming Events and Inflation Considerations

Looking ahead, the economic calendars for both the UK and New Zealand are relatively subdued for the upcoming week. However, one event of particular interest is the Bank of England's Monetary Policy Committee (MPC) members appearing before Parliament's Treasury Select Committee. They are expected to discuss topics such as inflation and interest rates.

The MPC members are likely to emphasize that inflation remains a concern, possibly setting the stage for further interest rate hikes, possibly as soon as September. However, recent softer inflation data may introduce uncertainty into market pricing, potentially pushing the expected rate hike into November.

Market Impact and Technical Analysis

GBPNZD: A Brief Pause or a Trend Reversal?_1

From a technical analysis perspective, GBPNZD is approaching a lower trendline, making the zone around 2.105 a strong support level. This "confluence pocket" represents the intersection of the green support and the lower orange trendline, acting as a formidable non-horizontal support.

This confluence pocket presents a compelling area to look for buy setups, such as a double bottom pattern or a trendline break. As GBPNZD approaches the lower orange circle zone, traders may consider bullish reversal opportunities, aligning with the overall upward momentum of this currency pair.

TRADE RECOMMENDATION

BUY GBPNZD

ENTRY PRICE : 2.105

STOPLOSS : 2.0800

TAKE PROFIT : 2.1800

Risk Warnings and Disclaimers

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Warren Takunda

Forex

Traders' Opinions

Summary:

The Pound to Dollar exchange rate had a turbulent ride recently, initially rallying after the monthly job report, only to close lower. This article explores the complex dynamics at play, from mixed job data to technical analysis and global influences. It delves into support levels, the role of the U.S. Dollar, and upcoming events on both sides of the Atlantic that could shape the GBPUSD landscape.

SELL GBPUSD

Close Time

CLOSED

1.26000

Entry Price

1.20000

1.28000

1.24423 +0.00770 +0.62%

103.2

Pips

Profit

1.20000

1.24968

Exit Price

1.26000

Entry Price

1.28000

Pound-Dollar Exchange Rate: A Rollercoaster Ride

The Pound-Dollar exchange rate has been making headlines lately, showcasing the intricate dance between economic data, technical trends, and global economic forces. In a recent twist, the exchange rate initially surged following the release of the monthly job report, only to end the day in a lower position, underscoring the challenges of betting against the U.S. Dollar.

Mixed Job Report Dynamics

The job report for August presented a mixed bag of results. While job increases surpassed expectations, a simultaneous rise in the unemployment rate and softer-than-anticipated wages tempered the initial optimism. These figures, however, failed to create significant ripples in expectations for Federal Reserve interest rate hikes. The U.S. Dollar's ongoing recovery continued, highlighting its resilience.

Technical Analysis: A Bearish Outlook

Technical analysis of the GBPUSD pair paints a bearish picture. The UK currency has been on a downward trajectory since mid-July, and signs suggest this trend may persist in the near term. Key support levels for traders to watch include 1.2577 and 1.242, with the potential for a reversion to the low from the end of May at approximately 1.232.

The Dollar Dominates

One thing is clear: the primary driver of the Pound-Dollar exchange rate remains the strength of the U.S. Dollar. This dynamic is expected to be especially pronounced as there's limited UK economic data scheduled for the upcoming week.

Bank of England's Influence

Nonetheless, the Bank of England's Monetary Policy Committee (MPC) members will have a chance to influence the market's sentiment. They are slated to testify before Parliament's Treasury Select Committee, focusing on UK inflation and interest rates. MPC members' statements may hint at concerns about elevated inflation and the possibility of further rate hikes, which could sway market expectations.

Inflation Uncertainty

However, recent softer inflation data from the UK might introduce an element of uncertainty regarding a potential November rate hike. The British Pound is sensitive to these developments, making it crucial for traders to monitor closely.

U.S. Dynamics Matter

But it's not just the UK side of the GBPUSD equation that matters; the U.S. side is equally pivotal. All eyes are on the midweek release of the ISM services index for August, as well as data related to Fed rate hike probabilities. Recent U.S. inflation readings suggest a return to the Fed's target of 2.0%, potentially affecting the monetary policy decisions of the upcoming September FOMC meeting.

Technical Insight: A Bearish Trend

GBPUSD: What's Driving the GBPUSD Rollercoaster? Job Data, Inflation, or Technicals?_1

In terms of technical analysis, the GBPUSD pair moved out of a descending channel and dropped. It bounced off the psychological level at 1.26000 and is currently retracing to the broken level. The market has created a "kill zone" for short positions, characterized by resistance and a 50% Fibonacci retracement. Given the bearish trend, expectations lean towards a further downward move.

In conclusion, the Pound-Dollar exchange rate is navigating choppy waters, with mixed job data, technical signals, and global economic factors at play. Traders should keep a watchful eye on critical support levels, central bank communications, and U.S. economic indicators, as these will likely shape the course of this volatile currency pair in the days and weeks ahead.

TRADE RECOMMENDATION

SELL GBPUSD

ENTRY PRICE : 1.2600

STOP LOSS : 1.2800

TAKE PROFIT : 1.2000

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Traders' Opinions

Summary:

Oil prices have surged by 5%, pushing Brent crude to new highs for 2023. This article explores the factors driving this momentum, the tightness of the oil market, and the potential for prices to break above the $90 per barrel mark. It also examines the roles of Saudi Arabia and Russia in managing production cuts, technical indicators suggesting continued strength, and short-term trading strategies.

BUY BRENT

Close Time

CLOSED

88.000

Entry Price

95.000

84.000

76.732 +0.916 +1.21%

149.8

Pips

Profit

84.000

89.498

Exit Price

88.000

Entry Price

95.000

Oil Prices and Momentum

In recent weeks, the global oil market has witnessed a remarkable rally, with prices surging by 5%. The standout performer in this surge has been Brent crude, which has reached its highest point in 2023. What's particularly striking is the resilience of this rally, as it appears to maintain its momentum despite minor fluctuations.

Market Tightness

One of the key drivers behind this rally is the persistent tightness in the oil market. This tightness, characterized by limited supply and robust demand, has played a pivotal role in supporting and propelling the price of Brent crude. As long as this market tightness persists, there's a solid foundation for prices to remain elevated.

Potential Break Above $90

The big question on everyone's mind is whether oil prices can break above the psychologically significant $90 per barrel threshold. The article speculates that the current momentum, especially in proximity to this price level, could provide the impetus needed for a significant breakthrough. If this were to occur, it would signify a substantial shift in market dynamics and could open the door to further price gains.

Saudi Arabia and Russia's Role

Saudi Arabia and Russia have played a pivotal role in managing oil production levels. While both nations have been voluntarily cutting production on a monthly basis, it's suggested that they may proceed cautiously when it comes to withdrawing these cuts. The reason behind this strategic move is to prevent a sudden drop in oil prices, which could have adverse effects on their economies.

Technical Analysis

From a technical perspective, several indicators are aligning with the upward trajectory of oil prices. Key metrics like the Moving Average Convergence Divergence (MACD) and the stochastic oscillator are not showing signs of weakening. Instead, they continue to trend higher in tandem with the oil price. This suggests that the bullish trend remains intact, even as the market approaches resistance zones.

Higher Highs on Lower Timeframes

Even when examining lower timeframe charts, such as the 4-hour chart, the recent oil price rally is evident through the creation of higher highs. This pattern reinforces the notion of sustained momentum in the market.

UKOIL: Riding the Oil Wave: Brent Hits New 2023 Highs_1

For traders, this recent surge presents opportunities. The new movement has already begun, with prices currently trading in the bullish zone. Short-term traders may look for a retest of around $82.29 before anticipating a continued rise towards $89.89.

However, a word of caution: for a bearish trend to emerge, the market would need to touch $82.29 and close a 4-hour candle below this level. Until such a scenario unfolds, the bullish momentum appears firmly intact.

In conclusion, the current oil price rally is underpinned by both fundamental and technical factors, with the potential for prices to break above $90 per barrel. For traders, careful monitoring of key support and resistance levels, along with an eye on technical indicators, will be critical in navigating this dynamic market.

TRADE RECOMMENDATION

BUY UKOIL

ENTRY PRICE : 88.00

STOP LOSS : 84.00

TAKE PROFIT : 95.00

Risk Warnings and Disclaimers

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Data

Canadian Dollar Weakens as GDP Growth Disappoints - Implications for Bank of Canada

Canadian Dollar Faces Headwinds Amid Weak GDP Growth

Consumer Delinquency Rates on the Rise

Bank of Canada's Response and Impact on the CAD

Inflation Remains a Factor

Market Reaction and Technical Analysis

Conclusion

TRADE RECOMMENDATION

DXY: Dollar's Reaction to August's Employment Figures

The August Data Dilemma

Market Sentiment and the Pound-Dollar Exchange Rate

Analyzing the Dollar's Trajectory

The Changing Landscape of the Labor Market

Looking Forward: Challenges and Strengths

The Dollar's Technical Outlook

TRADE RECOMMENDATION

Bullish on Dollar, but Not to Long in the Near Term

Fundamentals

Technical Analysis

Trading Recommendations

Pullback from 2023 High Amid Shifting Dynamics

Support from Key Levels:

China's Influence on the Australian Dollar:

RBA's Policy Decision and Its Implications:

Inflation and Labor Market Trends:

TRADE RECOMMENDATION

A Brief Pause or a Trend Reversal?

The Uptrend and Recent Retreat

Confirming Momentum

Challenges for AUD and NZD

Upcoming Events and Inflation Considerations

Market Impact and Technical Analysis

TRADE RECOMMENDATION

What's Driving the GBPUSD Rollercoaster? Job Data, Inflation, or Technicals?

Pound-Dollar Exchange Rate: A Rollercoaster Ride

Mixed Job Report Dynamics

Technical Analysis: A Bearish Outlook

The Dollar Dominates

Bank of England's Influence

Inflation Uncertainty

U.S. Dynamics Matter

Technical Insight: A Bearish Trend

TRADE RECOMMENDATION

UKOIL: Riding the Oil Wave: Brent Hits New 2023 Highs

Oil Prices and Momentum

Market Tightness

Potential Break Above $90

Saudi Arabia and Russia's Role

Technical Analysis

Higher Highs on Lower Timeframes

TRADE RECOMMENDATION

Risk Disclosure