USD/CAD drops below 1.30 on upbeat Canadian GDP figures, recovers losses as USD rebounds

• Canadian GDP grows 0.5% in May following April’s 0.1%.
• Core-PCE price index figures from the U.S. disappoint.
• The initial reaction drags the USD/CAD pair to a fresh multi-week low below 1.30.

The USD/CAD pair recorded a quick 50-pip drop with the initial reaction to the data releases from Canada and the United States. After touching its lowest level since June 14 at 1.2990, the pair pulled back a little and was last seen trading at 1.3012, where it was down 0.18% on the day.

The data released by Statistics Canada showed that the real-GDP expanded by 0.5% on a monthly basis to record its best monthly percentage gain of the year. The report highlighted that the industries that were affected by the unusually cold weather in April rebounded nicely in May to contribute to the strong growth. Further details of the publication revealed that the wholesale trade increased by 1.4% in May. Meanwhile, a separate  report showed that the Industrial Product Price Index and the Raw Materials Price Index both rose 0.5% in June.

On the other hand,  the US Bureau of Economic Analysis reported that the annual core-PCE Price Index, the Fed’s preferred measure of inflation, came in at 1.9% in June to match the May’s reading (revised down from 2%). Moreover, personal spending and personal income both increased by 0.4% on a monthly basis to match analysts’ estimates. After falling sharply to a session low at 94.16, the US Dollar Index reversed its course and was last seen trading flat on the day at 94.35.  

Technical outlook

The initial support for the pair is located at 1.2990/1.3000 (daily low/psychological level) ahead of 1.2970 (100-DMA) and 1.2920 (Jun. 8 low). On the upside, resistances align at 1.3130 (20-DMA/50-DMA), 1.3200 (psychological level) and 1.3290 (Jul. 19 high).