CFD Trading Rate US Dollar vs Canadian Dollar (USDCAD)

• USD/CAD extends its gains as Crude oil prices encounter challenges.
• Crude oil prices face challenges on higher API Weekly Crude Oil Stock.
• US Dollar received upward support on the expectation of the Fed’s delaying rate cuts.
• US GDP Annualized (Q4) rose by 3.2% against the expected 3.3%.

USD/CAD continues its winning streak, marking the fifth consecutive session with gains, as it edges higher around 1.3580 during the Asian session on Thursday. The Canadian Dollar (CAD) faced downward pressure against the US Dollar (USD) due to the lower Crude oil prices, thereby providing support to the USD/CAD pair. Furthermore, Canada’s Gross Domestic Product data will be closely monitored later in the North American session.

West Texas Intermediate (WTI) oil price struggles to recover from intraday losses and trades higher near $78.10 per barrel at the time of writing. However, Crude oil prices encountered challenges as expectations for the Federal Reserve (Fed) to delay the first-rate cuts emerged. Additionally, the higher API Weekly Crude Oil Stock added to the downward pressure on oil prices.

In December 2023, Canada’s average weekly earnings of non-farm payroll employees increased by 3.8% YoY, showing a slight deceleration from the revised 3.9% growth recorded in November 2023. Additionally, the country's Current Account deficit narrowed to CAD 1.62 billion in the fourth quarter of 2023, against the previous reading of CAD 4.74 billion but it was slightly above market expectations of a CAD 1.25 billion deficit.

The recent Gross Domestic Product (GDP) data from the United States (US) has prompted financial markets to postpone expectations for the Federal Reserve’s (Fed) first rate cut. This has lent some support to the US Dollar (USD), bolstering the USD/CAD pair.

The preliminary US Gross Domestic Product Annualized expanded by 3.2% in the fourth quarter of 2023, slightly below market expectations of remaining steady at 3.3%. Additionally, the preliminary US Gross Domestic Product Price Index (Q4) increased by 1.7%, surpassing both expected and previous rises of 1.5%.

The US Dollar Index (DXY) maintains stability amid higher US Treasury yields. Furthermore, US Federal Reserve speakers have expressed a cautious stance, indicating potential rate cuts later in the year. This has led to a diminished likelihood of rate cuts in upcoming meetings, providing upward support for the Greenback. Traders await the release of key US Personal Consumption Expenditures - Price Index data, which could potentially influence the Federal Reserve's monetary policy stance.

• USD/CAD flubs recovery above 1.3600 due to mixed US Q4 GDP.
• Canada sees soured Current Account print that misses expectations.
• Thursday’s Canada GDP to be eclipsed by US PCE.

USD/CAD saw an early Wednesday rally above the 1.3600 handle pull back into recent congestion after US Gross Domestic Product (GDP) figures were mixed on release. Markets will be pivoting to focus on Thursday’s US Personal Consumption Expenditure Price Index (PCE) as the Federal Reserve’s (Fed) inflation metric of choice.

Canada saw a worse-than-expected print in the fourth quarter Current Account, but the figure still recovered from the previous decline. Canadian Q4 GDP is also slated for Thursday, but it is set to be entirely overshadowed by the US PCE inflation update.

Daily digest market movers: USD/CAD sours but still on the high side

• Canada’s Q4 Current Account came in at -1.62 billion, missing the forecast recovery of -1.25 billion but still improved on the previous quarter’s -4.74 billion, which was revised lower from -3.22 billion.
• US Q4 GDP accelerated QoQ to 1.7% from the previous 1.5%.
• Annualized Q4 US GDP ticked lower to 3.2% from the steady forecast of 3.3% after late revisions to Q1 GDP dragged the yearly average lower.
• Read more: US Q4 GDP growth revised lower to 3.2% from 3.3%.
• Early US PCE numbers came in slightly higher than expected, with QoQ Core PCE for Q4 rising to 2.1% from the forecasted flat print at 2.0%, and PCE Prices ticked up to 1.8% from the expected flat print at 1.7%.
• Markets will be pivoting to Thursday’s US PCE Price Index, scheduled for 13:30 GMT.
• US Core PCE Preview: Forecasts from nine major banks, a hot reading.
• Core PCE Price Index for the year ended January is forecast to tick down to 2.8% from the previous 2.9%.
• Q4’s Canadian GDP Annualized is expected to rebound to 0.8% from the previous -1.1%.

Technical analysis: USD/CAD hesitates on the top end after testing 1.3600

USD/CAD rallied on Wednesday, briefly crossing the 1.3600 handle before paring back into recent technical levels. The pair found a fresh ten-week high at 1.3606, but 1.3580 remains a tricky barrier to break.

Daily candlesticks continue to etch out a rough pattern of higher highs as momentum runs aground of the 200-day Simple Moving Average (SMA) at 1.3478. Despite near-term congestion, USD/CAD has closed in the green for all but one of the last eight consecutive weeks.

USD/CAD hourly chart

USD/CAD daily chart

USD/CAD is retesting the mid-February high at 1.3590. Economists at Scotiabank analyze the pair’s outlook.

Loonie likely to remain soft for now

• USD/CAD continues to gain ground on risk-off sentiment ahead of GDP data from both nations.
• The Canadian Dollar faces challenges due to the decline in the WTI price.
• CME FedWatch Tool suggests a 1.0% probability of rate cuts in March.

USD/CAD continues its winning streak for the fourth consecutive session, trading higher around 1.3570 during the European session on Wednesday. The Canadian Dollar (CAD) received downward pressure due to the decline in Crude oil prices, consequently, underpinning the USD/CAD pair. Furthermore, Canada’s Gross Domestic Product data will be eyed on Thursday.

West Texas Intermediate (WTI) oil prices snap its two-day winning streak, dropping to near $77.80 per barrel, at the time of writing. The challenges facing the oil market due to higher borrowing costs are indeed impacting global economic growth and reducing oil demand.

Additionally, the ongoing uncertainty surrounding ceasefire talks between Israel and Hamas, along with the continued targeting of civilian shipping vessels in the Red Sea by Iran-backed Houthis, adds further complexity to the situation.

The US Dollar Index (DXY) gains ground despite the subdued US Treasury yields. The DXY rises to nearly 104.10, while the 2-year and 10-year yields on US Treasury bonds stand at 4.69% and 4.29%, respectively, by the press time.

The improved US Dollar (USD) is bolstering the USD/CAD pair, possibly due to prevailing risk-off sentiment in the market ahead of the release of the preliminary Gross Domestic Product Annualized data from the United States scheduled for Wednesday. However, market expectations anticipate that the US GDP will remain steady at 3.3% in the fourth quarter of 2023.

The Federal Reserve’s (Fed) officials have signaled caution regarding any rapid reductions in interest rates, resulting in a reduced likelihood of a rate cut in the upcoming meetings. According to the CME FedWatch Tool, the probability of rate cuts in March has decreased to 1.0%, while the likelihood of cuts in May and June stands at 21% and 49.8%, respectively.

• USD/CAD gains positive traction for the fourth straight day amid a modest USD uptick.
• Bullish Crude Oil prices could underpin the Loonie and keep a lid on any further gains.
• The prelim US Q4 GDP could provide some impetus ahead of US PCE data on Thursday.

The USD/CAD pair scales higher for the fourth successive day on Wednesday and climbs to a nearly two-week high, around the 1.3545 region during the Asian session. The positive move is exclusively sponsored by a modest pickup in the US Dollar (USD) demand, though bullish Crude Oil prices might keep a lid on any further gains.

The initial market reaction to Tuesday's disappointing US Durable Goods Orders fades rather quickly amid growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer. This, in turn, assists the USD Index (DXY), which tracks the Greenback against a basket of currencies, to build on the overnight bounce from a technically significant 200-day Simple Moving Average (SMA) and acts as a tailwind for the USD/CAD pair.

That said, the looming US government shutdown, along with a fresh leg down in the US Treasury bond yields and the risk-on rally across the global equity markets, could act as a headwind for the safe-haven buck. Meanwhile, Crude Oil prices stand tall near the monthly peak touched on Tuesday and underpin the commodity-linked Loonie. This could further contribute to capping gains for the USD/CAD pair and warrants caution for bullish traders.

Talks of an extension to production cuts from OPEC+ come on top of attacks on ships in the Red Sea by Iran-aligned Houthis in Yemen and continue to lend support to Crude Oil prices. This, in turn, could underpin the commodity-linked Loonie and keep a lid on any further appreciating move for the USD/CAD pair. Traders might also prefer to wait on the sidelines ahead of the US Personal Consumption Expenditures Price Index on Thursday.

The crucial US inflation data should provide fresh cues about the Fed's rate-cut path, which, in turn, will drive the USD demand and help in determining the next leg of a directional move for the USD/CAD pair. In the meantime, traders will take cues from the release of the Prelim US Q4 GDP print, which, along with speeches by influential FOMC members, might produce short-term opportunities later during the North American session.

• USD/CAD started the day soft before a pivot in the US session.
• Canada absent from the economic calendar on Tuesday.
• US Durable Goods declined more than expected, US PCE in the pipe.

USD/CAD settled to an intraday low of 1.3484 before rallying back above the 1.3500 handle after US Durable Goods Orders declined more than expected. The pair remains mired in near-term congestion as markets await US Personal Consumption Expenditure Price Index (PCE) data on inflation later in the week.

Canada waits until Wednesday to make an appearance on the economic calendar with Q4’s Current Account. This Canadian data release will be overshadowed, however, by the US Gross Domestic Product (GDP) report due simultaneously at 13:30 GMT on Wednesday.

Daily digest market movers: USD/CAD pivots on Durable Goods miss

• US Durable Goods Orders declined 6.1% in January, missing the -4.5% forecast versus the previous month’s -0.3% (revised lower from 0.0%).
• The Conference Board Consumer Confidence Index also declined more than expected, printing at 106.7 versus the forecast of 115.0, previously 114.8.
• The US Housing Price Index rose less than expected in December, climbing just 0.1% MoM versus the 0.3% forecast. It was previously revised to 0.4% in November.
• Canada’s Q4 Current Account on Wednesday is expected to recover but still remain in negative territory, forecast to print at -1.25 billion versus -3.22 billion previously.
• US annualized Q4 GDP is forecast to hold steady at 3.3%.
• Canada’s Q4 GDP to follow on Thursday, markets expect a rebound in the yearly figure to 0.8% from -1.1%.

Technical analysis: USD/CAD continues to chug near 1.3500

USD/CAD dipped into 1.3484 on Tuesday before recovering into the familiar 1.3520 level. The pair continues to churn around the 1.3500 handle, and the 200-hour Simple Moving Average (SMA) remains a key barrier to momentum in either direction in the near term.

The immediate technical barrier of February’s high of 1.3586 remains a key level for bulls to break through to challenge the 1.3600 handle. A rising pattern of higher lows on the daily candles provides technical support for immediate bullish momentum, but price action is trading into a heavy supply zone from 1.3500 to 1.3550.

USD/CAD hourly chart

USD/CAD daily chart

USD/CAD continues to drift somewhat aimlessly within a well-established trading range. Economists at Scotiabank analyze the pair’s outlook.

Technicals suggest more of the same

• USD/CAD meets with some supply on Tuesday and is pressured by a combination of factors.
• Attacks on shipping in the Red Sea lend support to Oil prices, which underpins the Loonie.
• Sliding US bond yields keep the USD bulls on the defensive and contribute to the decline.

The USD/CAD pair comes under some selling pressure on Tuesday and maintains its offered tone through the first half of the European session. Spot prices currently trade just below the 1.3500 psychological mark and for now, seem to have snapped a two-day winning streak to a multi-day peak touched on Monday.

Crude Oil prices attract some buyers for the second straight day in the wake of growing concerns about supply disruptions in the Middle East, led by persistent attacks by Iran-aligned Houthis on commercial vessels in the Red Sea. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with the prevalent selling bias around the US Dollar (USD), exerts some downward pressure on the USD/CAD pair.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, continues with its struggle to gain any meaningful traction amid a fresh leg down in the US Treasury bond yields. That said, firming expectations that the Federal Reserve (Fed) will wait until June before cutting interest rates should act as a tailwind for the US bond yields, which should limit losses for the USD and the USD/CAD pair.

Looking at the broader picture, spot prices have been oscillating in a familiar trading range over the past two weeks or so. This further warrants some caution before placing aggressive directional bets ahead of this week's release of the crucial US Personal Consumption Expenditures (PCE) Price Index on Thursday. The data should provide cues about the Fed's rate-cut path, which, in turn, will drive the USD and the USD/CAD pair.

In the meantime, traders on Tuesday will take cues from the US economic docket – featuring the releases of Durable Goods Orders, the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. This, along with the US bond yields, will influence the USD. Apart from this, Oil price dynamics should contribute to producing short-term trading opportunities around the USD/CAD pair.

• USD/CAD loses ground to a major level of 1.3500 on Tuesday.
• The immediate support area appears around the 23.6% Fibonacci retracement level at 1.3489 and 50-day EMA at 1.3476.
• The pair could find immediate resistance around the major level of 1.3550 and February’s high at 1.3586.

USD/CAD continues to lose ground on the subdued US Dollar (USD), which could be attributed to the lower US Treasury yields. The USD/CAD pair inches lower to near 1.3500 during the Asian session on Tuesday.

The USD/CAD pair could find the immediate support region around the 23.6% Fibonacci retracement level at 1.3489 and the 50-day Exponential Moving Average (EMA) at 1.3476. A break below the latter could prompt the pair to approach the major level of 1.3450 before the 38.2% Fibonacci retracement level at 1.3430. Further support appears at the psychological support at the 1.3400 level.

The technical analysis of the 14-day Relative Strength Index (RSI) is positioned above 50, suggesting bullish momentum for the USD/CAD pair.

Furthermore, the Moving Average Convergence Divergence (MACD) indicator for the USD/CAD pair, indicates a subdued momentum in the market. This interpretation is based on the MACD line's position above the centerline but lies below the signal line. Traders could await a clearer directional signal from the lagging indicator MACD before making aggressive trades in the pair.

On the upside, the USD/CAD pair could meet the key resistance at the major level of 1.3550 following February’s high at 1.3586. A break above February’s high could exert upward support to lead the pair to explore the region around the psychological resistance level at 1.3600.

USD/CAD: Daily Chart

• USD/CAD consolidates around 1.3507 in Tuesday’s early Asian session. 
• Several Fed officials are worried about the risks of moving too quickly on rate cuts.
• The Canadian inflation data eased more than expected in January, prompting speculation of an early interest rate cut from the BoC.

The USD/CAD pair oscillates in a narrow trading band of 1.3495–1.3515 during the early Asian session on Tuesday. Investors await the fresh catalysts from the incoming economic data this week. The US and Canadian Gross Domestic Product (GDP) will be released on Wednesday and Thursday, respectively. The pair currently trades around 1.3507, adding 0.01% on the day. 

The Federal Reserve (Fed) Chairman Jerome Powell said last month that the central bank wants to gain more confidence that inflation is on a sustainable path down to the 2% target before lowering the interest rate. Additionally, the FOMC minutes indicated that several policymakers were worried about the risks of moving too quickly on rate cuts. The dovish remarks from Fed officials and a data-driven approach weigh on the US Dollar (USD) and act as a headwind for the USD/CAD pair. 

On the Loonie front, the Canadian CPI inflation data eased more than expected to 2.9% in January. The report triggered speculation of an early interest rate cut from the Bank of Canada (BoC). The BoC's next monetary policy meeting is scheduled for March 6, and investors anticipate the rate will stay on hold at 5.0%. However, the markets have priced in 58% odds of a rate cut in the April meeting, a rise from a 33% chance before the CPI data were published.

On Tuesday, the US Durable Goods Orders, Consumer Confidence, and Richmond Fed Manufacturing Index are due. Also, the Fed’s Michael Barr is set to speak later in the day. The US and Canadian GDP for Q4 will be the highlights this week. This event could trigger volatility in the market and give a clear direction to the USD/CAD pair. 

• USD/CAD continues Friday’s thin drift near the 1.3500 handle.
• Canada wholesale trade likely fell 0.6% in January.
• US New Home Sales rose 1.5% vs 7.2% previous, Durable Goods due tomorrow.

USD/CAD is stuck in a slow drift near 1.3500 as markets gear up for the week. Economic data remains thin on Monday, and traders will be looking ahead to Tuesday’s US Durable Goods Orders for January, as well as Wednesday’s US Gross Domestic Product (GDP) growth for the fourth quarter.

Canada is predominantly underrepresented on the economic calendar until Thursday’s Canadian GDP Q4 performance. StatCan noted on Monday that Canadian wholesale trade likely fell in January with January’s Canadian manufacturing sales seeing a slight bump.

Daily digest market movers: USD/CAD gears up for a key data week with easy Monday

• According to StatCan Flash Estimate, Canada’s January wholesale trade likely fell by 0.6% MoM, while January manufacturing sales likely rose 0.4% MoM.
• US New Home Sales Change rose 1.5% MoM in January compared to the previous month’s 7.2% (revised from 8.0%).
• US New Home Sales in January 661K versus 680K, previous 651K (revised from 664K).
• Tuesday’s US Durable Goods Orders for January is forecast to decline 4.8% MoM, previous print 0.0%.
• Canada’s Current Account is expected to record -1.25 billion on Wednesday, -3.22 billion previous.
• US fourth-quarter GDP growth forecast to hold steady at 3.3% for the year ended 4Q.
• Canada’s Q4 GDP slated for Thursday, forecast to rebound to 0.8% QoQ versus the previous -1.1%.

Technical analysis: USD/CAD sees technical floor near 1.3500 as pair churns

USD/CAD near-term technical action continues to see a sideways grind as investors grapple with picking a meaningful direction. 1.3500 remains a key technical level, keeping intraday bids magnetized to the major price handle. USD/CAD has cycled 1.3500 in a rough sideways channel since February 5.

Daily candlesticks remain stuck to the 200-day Simple Moving Average (SMA) at 1.3478 just beneath 1.3500. USD/CAD remains stuck in the middle ground between December’s lows near 1.3177 and last November’s early peak near 1.3900.

USD/CAD hourly chart

USD/CAD daily chart

The Canadian Dollar (CAD) is a moderate underperformer on the session so far. Economists at Scotiabank analyze USD/CAD outlook.

Scope for gains is limited

• USD/CAD scales higher for the second successive day on Monday amid sliding Oil prices.
• Retreating US bond yields undermines the USD, though does little to hinder the uptick.
• The US housing market data could produce short-term trading opportunities later today.

The USD/CAD pair is seen building on last week's rebound from the 1.3440 support zone and gaining some positive traction for the second successive day on Monday. Spot prices stick to modest intraday gains through the first half of the European session and currently trade around the 1.3525 region amid weaker Crude Oil prices.

Market participants remain uncertain about the fuel demand outlook amid expectations that higher borrowing costs will dent the economic activity in the US – the world's largest Oil consumer. This, in turn, drags Crude Oil prices away from a multi-week top touched last Thursday, which is seen undermining the commodity-linked Loonie. Adding to this, softer-than-expected Canadian consumer inflation figures released last week exert additional pressure on the Canadian Dollar (CAD) and lend support to the USD/CAD pair.

Meanwhile, the intraday uptick seems rather unaffected by subdued US Dollar (USD) price action, led by retreating US Treasury bond yields. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer favours the USD bulls and suggests that the path of least resistance for the USD/CAD pair is to the upside. It, however, remains to be seen if spot prices could extend the momentum amid worries about supply disruptions in the Middle East, which could act as a tailwind for Crude Oil prices.

Moving ahead, Monday's release of New Home Sales data from the US, along with the US bond yields and the broader risk sentiment, might drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from Oil price dynamics to grab short-term opportunities. the focus, however, will remain glued to the US Core PCE Price Index, which will play a key role in influencing the Fed's future policy decisions and determining the near-term trajectory for the currency pair.

• USD/CAD could breach the key barrier at 1.3550 to test February’s high at 1.3586.
• Traders could await the MACD indicator to confirm a clear directional trend.
• The pair could find immediate support at the psychological level of 1.3500 followed by the 50-day EMA at 1.3475.

USD/CAD moves higher for the second consecutive day, inching higher to near 1.3520 during the European session on Monday. The pair could meet the key barrier at the major level of 1.3550 following February’s high at 1.3586.

A break above the latter could exert upward support to lead the USD/CAD pair to explore the region around the psychological resistance level at 1.3600.

The technical analysis of the 14-day Relative Strength Index (RSI) is positioned above 50, suggesting bullish momentum for the USD/CAD pair.

Furthermore, the Moving Average Convergence Divergence (MACD) indicator for the USD/CAD pair, a lagging indicator, indicates a subdued momentum in the market. This interpretation is based on the MACD line's position above the centerline but resting on the signal line. Traders might prefer to await a clearer directional signal from the MACD indicator before initiating any trading actions.

On the downside, the immediate support appears at the psychological level of 1.3500 followed by the 23.6% Fibonacci retracement level of 1.3489 and the 50-day Exponential Moving Average (EMA) at 1.3475.

The USD/CAD pair could further fall to the major level of 1.3450 before the 38.2% Fibonacci retracement level at 1.3430. A break of this level could put downward pressure on the pair to test the psychological support at the 1.3400 level.

USD/CAD: Daily Chart

• USD/CAD edges higher to 1.3512 in Monday’s Early European session. 
• The cooler-than-expected Canadian inflation numbers might convince the Bank of Canada to cut rates sooner than expected.
• The Fed's Waller said the central bank should delay rate cuts in the coming months to see more evidence of inflation data. 

The USD/CAD pair attracts some buyers above the 1.3500 mark during the Asian session on Monday. The recovery of the pair is bolstered by renewed US Dollar (USD) demand. Investors await the Canadian Current Account and the US Gross Domestic Product annualized for the fourth quarter (Q4) for fresh impetus. At press time, USD/CAD is trading at 1.3512, adding 0.07% on the day. 

The Canadian Consumer Price Index (CPI) slowed more than expected to 2.9%. It’s the first time inflation has fallen into the Bank of Canada’s (BoC) target range since mid-2021. The cooler-than-expected inflation numbers suggested the door to interest rate cuts could open much sooner than the central bank expected. Meanwhile, the corruptive move in oil prices might weigh on the commodity-linked loonie.  

On the other hand, the hawkish comments from Federal Reserve (Fed) officials about keeping the policy rate higher for longer provided some support to the US Dollar (USD). Last week, Fed Governor Christopher Waller said the Fed should delay interest rate cuts by at least a few more months to see more evidence of inflation data. 

Moving on, market participants will focus on the US GDP growth number for Q4 and the Canadian Q4 Current Account. On Thursday, the Canadian GDP and the US Q4 Core Personal Consumption Expenditures Price Index (Core PCE) will be due 

• USD/CAD dipped to 1.3461 before a US-session surge back to 1.3500.
• It's a thin Friday on the economic calendar.
• USD/CAD put a lot of effort going nowhere this week.

USD/CAD looked in both directions on Friday as markets see thin action heading into the week’s closing bell. It was a relatively sedate trading week for the pair with the US Dollar (USD) gaining around a third of a percent against the Canadian Dollar (CAD).

Next week brings a slew of data for both the US and Canada with US Gross Domestic Product (GDP) on Wednesday and Canadian GDP on Thursday alongside US Personal Consumption Expenditure (PCE) figures. Next Friday also brings Purchasing Managers Index (PMI) figures for both Canada and the US.

Daily digest market movers: USD/CAD churns the midrange on quiet Friday

• Friday markets look thin, leaving USD/CAD open to drift in the middle.
• Thursday’s mixed PMIs for the US and Retail Sales for Canada leave the pair with little directional momentum to wrap up the week.
• Next week is set to open quiet as well with only January’s US New Home Sales on the docket for Monday.
• US New Home Sales Change last printed at 8.0% in December, New Home Sales are expected to increase slightly to 680K from 664K.
• Tuesday also sees mid-tier data with US Durable Goods figures for January forecast to print at -4.0% versus the previous 0.0%.
• Canada is absent from the economic calendar until Wednesday’s Current Account figures for the fourth quarter, which last printed at -3.22 billion.

Technical analysis: 1.3500 is proving a tough number to beat

USD/CAD continues to cycle 1.3500 as the pair experiments with losing momentum in the longer term. The 1.3500 figure remains a sticky major level for the pair, but a heavy supply zone near 1.3530 could prove a viable selling region for particularly brave traders as the pair etches in the beginnings of a Fair Value Gap (FVG) on Friday.

USD/CAD continues to get mired in the 200-day Simple Moving Average at 1.3478, but a rough bullish pattern is still bullish, and the long-term moving average is providing a technical floor for bidders to push off of.

USD/CAD hourly chart

USD/CAD daily chart

The Canadian Dollar (CAD) has struggled during the early part of 2024. Economists at Wells Fargo expect this trend to continue over the course of the year.

USD/CAD seen at 1.3300 by year-end

• USD/CAD trades sideways below 1.3500, following the footprints of the US Dollar.
• Fed Waller said the central bank should not rush for rate cuts.
• The Canadian Retail Sales for December were more robust than expected.

The USD/CAD pair corrects to near 1.3480 in Friday’s European session after failing to sustain above the psychological resistance of 1.3500. The Loonie asset’s action is driven by the subdued US Dollar. After a strong recovery, the US Dollar Index (DXY) turns sideways as investors want fresh guidance on the Federal Reserve’s (Fed) interest rates.

S&P500 futures remain stagnant in the European session, indicating a quiet market mood. The USD Index hovers near 104.00 despite Fed policymakers reiterating the need for more evidence to gain confidence over inflation declining sustainably to the 2% target.

On Thursday, Fed Governor Christopher Waller said the risk in waiting for good inflation data is less than acting on rate cuts too quick. Waller is interested in observing data for at least a couple of months to confirm whether January’s sticky inflation numbers were a one-time blip or progress in price pressures is stalling.

Meanwhile, the Canadian Dollar fails to capitalize on robust Retail Sales data for December. Monthly Retail Sales grew at a robust pace of 0.9% against expectations of 0.8% and a stagnant performance in November. However, it has increased stubbornness in the inflation outlook.

USD/CAD forms a Head and Shoulder chart pattern on an hourly timeframe, which indicates a prolonged consolidation. A breakdown of the neckline plotted from February 9 at 1.3413 will result in a bearish reversal.

The 50-period Exponential Moving Average (EMA) is a significant barricade for the US Dollar bulls. The 14-period Relative Strength Index (RSI) hovers inside 40.00-60.00, which indicates a sideways trend.

A sell-off could appear if the Loonie asset drops below January 31 low at 1.3359. This will expose the asset to January 4 low at 1.3318 and January 5 low at 1.3288.

On the contrary, fresh upside would emerge if the Loonie asset climbs above January 17 high at 1.3542, which will drive asset towards the round-level resistance of 1.3600, followed by November 30 high at 1.3627.

USD/CAD hourly chart

• USD/CAD hovers around Thursday’s close of 1.3481.
• The lower WTI oil price puts pressure on the Canadian Dollar.
• The US Dollar cheered the mixed US PMI data, which indicated economic expansion.
• US Initial Jobless Claims dropped to 201K, lower than the expected 218K and 213K prior.

USD/CAD remains silent with a bias towards extending its losses for the third successive session, hovering around 1.3480 during the Asian session on Friday. The USD/CAD pair loses ground as the US Dollar (USD) remains subdued amidst speculation of potential interest rate cuts by the Federal Reserve (Fed). Additionally, the Canadian Dollar (CAD) received upward support following the release of mixed Retail Sales data from Canada on Thursday.

Statistics Canada released Retail Sales (MoM), indicating a 0.9% improvement in December, surpassing the anticipated 0.8% reading. This increase, compared to the previous flat reading of 0.0% in November, suggests higher sales volumes for retailers. However, monthly Retail Sales excluding Autos grew by 0.6%, slightly below the market expectation of 0.7%, yet marking a significant rebound from the previous decline of 0.4%.

However, the decline in the Crude oil prices could have weighed on the Canadian Dollar, consequently, limiting the losses of the USD/CAD pair. West Texas Intermediate (WTI) oil price edges lower to near $78.10 per barrel, by the press time. The demand for Crude oil is encountering challenges due to higher interest rates globally, which are dampening economic activities.

The US Dollar Index (DXY) received upward support on Thursday as labor data from the United States demonstrated strength. The US Bureau of Labor Statistics (BLS) reported that weekly Initial Jobless Claims dropped below consensus expectations, with figures reaching 201K for the week ending on February 16, lower than the market expectation of 218K and the previous figure of 213K.

Furthermore, mixed preliminary S&P Global Purchasing Managers Index (PMI) data indicated economic expansion, reinforcing the case for the Federal Reserve to maintain elevated interest rates for a longer duration to address inflationary pressures.

In detail, S&P Global US Services PMI posted a reading of 51.3 in February, slightly below the expected 52.0 and the prior figure of 52.5. Manufacturing PMI improved to 51.5, exceeding the anticipated 50.5 and the previous figure of 50.7. However, US Composite PMI declined to 51.4 in February from the previous reading of 52.0.