Canadian dollar falls to 3-week low on disappointing GDP data

The Canadian dollar fell to a three-week low against the US dollar on 30 June as data from Canada showed the economy contracted for the fifth straight month.

USD/CAD jumped to 1.2442, its highest since 8 June, from near 1.2370, where it was trading just before the data was out.

Canada's GDP shrank by 0.1% month-on-month in May, slightly improved from the April slide of 0.2%, but trailing market expectations of a rebound to 0.1% expansion.

In 2015, it was only in January that Canada showed GDP expansion when it was recorded 0.3%. Between February and May, the GDP performance averaged -1.5%.

The Canadian dollar has been on a downward trend since 18 June, and with a close above 1.2400 for USD/CAD, the loonie's technicals will be even more skewed to the bearish side.

The next resistance barrier for the pair will be 1.2563, the June high, above which the Canadian dollar will at its weakest since mid-April.

More importantly, that will resume the uptrend in the pair since mid-May, increasing downside risks for the loonie beyond its March levels of 1.2800/$, to new six-year lows.

On the downside for USD/CAD, one should first look at 1.2350, and then 1.2200, a break below which will open doors to new multi-month lows below the May trough of 1.2000. The 1.2140 mark is likely to offer some support.

Meanwhile, negative data surprise from the US failed to arrest the Canadian currency's slide against the greenback.

Data by S&P/Case-Shiller showed US home prices rallied only 4.9% year-on-year in April, slower than the 5% growth in March and against the consensus of 5.5% rise in the index.