Canadian Dollar softens on tepid Monday

• The Canadian Dollar was soft-footed to kick off Monday trading.
• Canada is drastically underrepresented on the economic calendar this week.
• US inflation data updates are the key to the week’s market sentiment.

The Canadian Dollar (CAD) struggled to find direction on Monday, easing against most of its major currency peers and middling against the Greenback on the charts. The CAD is holding steady at the top end of a swing high against the USD, but markets are huddling in the midrange as investors await the latest batch of US inflation figures due in the midweek.

Canada has a strictly low-tier showing on the economic calendar this week, leaving the Canadian Dollar at the mercy of overall market sentiment. Investors are still grappling with how the Federal Reserve’s (Fed) upcoming rate call in September will shake out, but rate markets are firmly gripping onto expectations of at least a quarter-point trim on September 18.

Daily digest market movers: Looming CPI prints leave markets hung in the midrange

• Canadian Building Permits declined again in June, printing at -13.9% MoM and adding to the previous month’s revised -12.7% contraction. Market impact is overall limited from low-tier housing data two months behind the curve, and CAD flows remain crimped.
• Fed one-year inflation expectations ticked lower on Monday, falling to 2.97% versus the previous 3.02%.
• Rate markets have eased back on bets of a double-cut in September, according to the CME’s FedWatch Tool. Rate traders now see less than 50% odds of a 50-bps cut on September 18, down from last week’s 70% odds.
• Despite the chill in bets for a double-cut, rate markets are still pricing in 100% odds of at least a 25-bps cut from the Fed in September.
• Key US inflation data in the midweek could throw a spanner in the works if price pressures bubble over again.
• US Producer Price Index (PPI) inflation due on Tuesday, US Consumer Price Index (CPI) inflation slated for Wednesday. Both metrics are expected to tick lower.

Canadian Dollar price forecast: Steady gains lead to middling ranges

The Canadian Dollar (CAD) put in a subpar performance on Monday, ticking lower against most of its major currency peers but finding thin gains against the Japanese Yen and the Swiss Franc. The CAD backslid over a quarter of a percent against the rebounding Antipodeans, and struggled to find direction against the Greenback and the European bloc, trading down within one-fifth of one percent against the Euro and the Pound Sterling.

USD/CAD price action has ground to a halt as bids grapple with the 50-day Exponential Moving Average (EMA) at 1.3730. Last week’s early Greenback rally failed to capture the 1.3950 level, giving the Canadian Dollar a chance to reclaim recently lost ground. 

Technical pressures are keeping bids bolstered above the 200-day EMA at 1.3625, but bullish CAD momentum could evaporate at any time, driving USD/CAD back into the high end.

USD/CAD daily chart