USD/CAD forms bullish flag after mixed Canada GDP data
- The USD/CAD has formed a bullish flag on the hourly chart.
- This is in reaction to the relatively mixed Canada GDP data.
- The pair is also reacting to activities in the bond market.
The USD/CAD is wavering as the market continues to focus on the US bond market, crude oil prices, and the latest Canadian GDP data. It is trading at 1.2657, which is 0.70% below yesterday’s high of 1.2747.
Bond market in focus
The USD/USD price is reacting to the recent performance of the bond yields of the two countries. In the past few weeks, US Treasuries have rallied, with the benchmark 10-year rising to the highest level since last year.
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In Canada, the ten-year Canadian government bonds rose to 1.50%, the highest level since January last year. This performance is mostly because of the billions of dollars that the Canadian government has unleashed to deal with the pandemic.
Further, the US is Canada’s biggest trading partner. Therefore, the $4 trillion stimulus that the US has unleashed has had a positive impact on the Canadian economy. Now, the US is already in the process of unleashing another giant $1.9 trillion package that could also have a positive impact on the Canadian economy.
The USD/CAD is also rising even as the price of crude oil struggles. The price of Brent has dropped by more than 5% today and is trading slightly above $60. The West Texas Intermediate (WTI) has moved below $60 ahead of a key meeting by OPEC+. Oil prices are important for the USD/CAD because Canada is the fourth-biggest exporter.
The pair is also reacting to the latest Canadian GDP data. According to the country’s statistics agency, the economy expanded by 0.1% in December after rising by 0.8% in the previous month. For the quarter, the economy expanded by 2.3%, leading to an annualised decrease of 9.6%. The agency cited the performance to the higher oil prices and increased consumer spending.
USD/CAD technical outlook
The hourly chart shows that the USD/CAD has been under pressure lately. It has dropped from this week’s high of 1.2745 to today’s low of 1.2640. On the hourly chart, it has moved to a few pips below the 25-period and 15-period moving averages. Notably, the pair seems to have formed a bullish flag pattern that is shown in blue. Therefore, the pair may ultimately break-out higher in the near term.