The Canadian dollar sank below 1.36 Tuesday overnight into early Wednesday, reaching a two-and-a-half-month low (USD/CAD highs), before finding its footing on mixed US GDP numbers. As discussed previously, any economic news perceived to shed light on the direction of the BoC (Bank of Canada) and the Fed (Federal Reserve) will move the USD/CAD pairing. That’s why Thursday’s double whammy of Canadian GDP data and the latest US Core PCE Price Index, which is the Fed’s inflation barometer of choice, will make Thursday a potentially volatile day for the Canadian dollar. If you benefit from a strong US Dollar, your preferred scenario would be a disappointing Canadian GDP number combined with a higher than expected inflation number in the US. This would mean that the BoC is more likely to cut rates than the Fed, which would increase the future potential interest rate differentials between the CAD and USD and push the Canadian dollar lower. How low is the question. The last resistance level for the USD/CAD pairing was 1.38, and if we get the above-outlined scenario, then 1.38 would be the next possible level for the pairing.
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