Australian dollar eyes Chinese PMI

Asia-Pacific market briefing – Canadian dollar sinks after local GDP slows

The Canadian dollar underperformed against its major counterparts on Tuesday, also tracking a cautious deterioration in risk appetite. At one point, the S&P 500 was down about 0.6% before trimming some of its losses. On the chart below, USD/CAD can be seen very closely inversely tracking stock markets. Interestingly, the Loonie was unable to capitalize on a strong performance in crude oil prices.

At 13:30 GMT, the latest Canadian GDP figures crossed the wires. Annualized quarterly growth clocked in at 2.9%, which was far greater than the 1.5% outcome. However, GDP was 0.1% m/m in September, in-line with expectations. Meanwhile, August’s output was revised higher to 0.3% m/m from 0.1%. In effect, Canadian growth slowed, opening the door to a less aggressive Bank of Canada.

In the context of daily moves since the beginning of 2020, USD/CAD’s 0.7% rise on Tuesday was about 1.34 standard deviations from the average. Using a cumulative distribution function, the probability that CAD weakens by 0.7% or more is at least about 10%.

Granted, past performance is not necessarily indicative of future output.

Canadian dollar and S&P 500

Wednesday’s Asia-Pacific trading session – Australian dollar eyeing China PMIs

The cautious mood on Wall Street could be setting up financial markets for a similar performance during Wednesday’s Asia-Pacific trading session. The Australian dollar will be closely watching November’s Chinese PMI gauges. Non-manufacturing data is seen clocking in at 49, down from 49.2 in October. Values below 50 indicate shrinking economic activity. Considering China has been having a bumpy ride with moving past strict Covid lockdowns, a softer print risks sending AUD/USD lower. China is Australia’s largest trading partner. Softer economic output in the former often implies knock-on impacts for the latter.

Canadian dollar technical analysis

On the daily chart, USD/CAD seems to have reinforced a near-term falling trendline from October. Prices were unable to break above resistance, maintaining the downside focus that has been prevalent for a few months. A turn lower places the focus on the 38.2% Fibonacci retracement level at 1.3513. On the other hand, confirming an upside breakout opens the door to reversing the near-term downtrend.

USD/CAD daily chart

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.