The Canadian dollar will continue to strengthen
Despite the good data on the economic growth of Canada, as well as the strengthening of oil quotations, the Canadian dollar fell against the US dollar on the back of a lack of results on trade negotiations between the US and Canada.
Today, NAFTA should be signed, which will establish trade relations between the countries. It was the expectation of this event that allowed strengthening of the Canadian dollar during the week.
As I noted above, traders ignored a good report, which indicated that Canada’s GDP grew in the second quarter of this year. The economic recovery was due to a significant increase in exports, as well as because of rising consumer spending.
According to the Bureau of Statistics of Canada, GDP in the second quarter rose to 1.878 trillion Canadian dollars by 2.9% year on year. Let me remind you that the 1st quarter the growth was 1.4%. Economists expected the economic recovery of 2.8%.
Given the current growth rate. Investors can continue to rely on tightening monetary policy from the Bank of Canada, which raised its key interest rate to 1.5% last month.
As for the technical picture of the USD/CAD pair, the strengthening of the Canadian dollar may continue further after the current upward correction in the pair. The return to resistance level 1.2985, which coincides with the 200-day moving average, will lead to a new wave of sales of the US dollar with the release to the lows of the month in the area of 1.2900. The breakthrough of this range opens a direct road to areas of 1.2835 and 1.2770. The upside potential of the pair will be limited by the large resistance levels of 1.2080 and 1.3180.
The Japanese yen declined against the US dollar amid weak data on industrial production in the country, but then quickly returned to its positions.
Japan’s industrial production declined again in July this year, according to the Ministry of Economy, Trade, and Industry of Japan. The fall of 0.1% compared to the previous month is the third in a row, which could affect the prospects for economic growth. Let me remind you that the industrial production fell by 1.8% in June of this year. Economists had expected an increase of 0.3% in July production.
According to the forecast, the growth of industrial production is expected to be only 5.6% in August of this year.