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Dollar Surged Following Strong GDP

David Becker
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Dollar Surged Following Strong GDP

USDCAD surged higher to 1.0893 after the mix of stronger U.S. GDP, and cooler Canadian IPPI data. The U.S./Canadian yield spreads have moved to 2014 highs, in favor of the USD, also making the greenback more attractive. The next level of target resistance for the currency pair is the June 2014 highs at 1.0965,

U.S. GDP growth rebounded 4.0% in Q2 after a 2.1% drop in Q1. The reading is much better than expected. Personal consumption expenditures increased 2.5% following a 1.2% Q1 gain. Fixed investment surged 5.9% versus Q1’s revised 0.2% gain, including a 7.5% jump in residential spending and a 5.5% increase in nonresidential spending. Government consumption increased 1.6%, while inventories added $58.2 billion after a $46.6 billion Q1 decline. The PCE chain price index sped up to a 2.0% rate versus 1.3% previously, with the core rate rising to 2.0% as well, from 1.2% previously.

U.S. ADP reported private payrolls climbed 218k in July, a little below market forecasts, following an unrevised 281k surge in June. The goods sector added 16k workers, while service sector employment surged 202k. Employment in professional/business services jumped 61k. Trade/transportation/utility employment rose 52k. Construction employment rose 12k, while manufacturing was up 3k, with financial/accounting jobs rising 9k.

chart-dollar-surged-following-strong-gdp.png

The USDCAD surged above trend line resistance created from the highs in April and the highs in June. Support is seen near the 10-day moving average near 1.0780. Momentum is positive as the MACD (moving average convergence divergence) index prints in positive territory with an upward sloping trajectory. The RSI surged higher with price action, reflecting accelerating positive momentum while printing near 69, which is a whisker under the overbought trigger level of 70.

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