Canadian Q3 GDP surprises to upside but the Canadian Dollar moves lower

At the last Bank of Canada meeting, Committee members hiked rates by 50bps to bring the overnight rate to 3.75%. However, markets were expecting an increase of 75bps. Was this a BOC pivot? And although policy makers said that rates need to be raised further, it also said that it expects the Canadian economy to expand at 3.25% in 2022, but less than 1% in 2023. On Tuesday, Canada released its Q3 2022 GDP at 2.9% vs an expectation of only 1.5% and 3.2% in Q2. The GDP deflator dropped to -1.4% vs an expectation of 1.2% and a previous reading of 3.2%. Even better, to kick off Q4, Canada released its preliminary GDP for October. The print was 0% vs -0.3% expected and 0.1% in September.

Everything you wanted to know about the Bank of Canada

The short-term, 15-minute chart of USD/CAD acted a bit unusual today, both before and after the data. One and a half hours before the GDP data was released, USD/CAD broke above the top of a flag formation around 1.3457 and took off. It reached its flag target almost immediately near 1.3500. However, once the data was released, which should have been bullish for the Canadian Dollar, the pair resumed its move higher, reaching an intraday high of 1.3575.

Source: Tradingview, Stone X

Trade USD/CAD now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a daily timeframe, USD/CAD had formed a Head and Shoulders pattern with a neckline near 1.3503. Price broke below the neckline on November 4^th. Yet, it wasn’t until November 10^th that USD/CAD moved aggressively lower towards the head and shoulders target of 1.3040. However, price held horizontal support at 1.3224 and began moving higher. With today’s move in price, up over 150 pips off the low, the head and shoulders pattern was negated as price traded back above the neckline. The pair in now up against a confluence of resistance at the highs of November 10^th and a long-term rising trendline dating to March 7^th at 1.3571.

Source: Tradingview, Stone X

If price continues to move higher, the next level of resistance is at the 50% retracement level from the highs of November 10^th to the lows of November 15^th at 1.3601 and then the 61.8% Fibonacci retracement level from the same timeframe near 1.3690. Above there is horizontal resistance from the highs of November 3^rd at 1.3808. However, if the resistance holds, the first support level is back at the neckline of the head and shoulders pattern near 1.3503/1.3505. Below there, price can fall to Tuesday’s low at 1.3408, then the low from November 25^th at 1.3317.

USD/CAD made a large move higher today, though it doesn’t seem like it was based on fundamentals. But there are several other upcoming events that traders could be looking ahead to. They include month-end, the OPEC+ meeting on Sunday (which could affect the direction of the Canadian Dollar), or even the Bank of Canada meeting next Wednesday. Whatever the reasoning, watch the support and resistance levels for areas where price may halt or even reverse.

Learn more about forex trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.