Mon. May 20th, 2024
CANADIAN DOLLAR USD/CAD REMAINS VULNERABLE AFTER STRONG US RETAIL SALESCANADIAN DOLLAR USD/CAD REMAINS VULNERABLE AFTER STRONG US RETAIL SALES

The Canadian Dollar (USD/CAD) is trading higher for the second consecutive session on Thursday.

  • Upbeat US data and hawkish comments by Fed’s Williams throw a spanner on Canadian Dollar’s recovery
  • US Initial Jobless Claims and housing data endorse belief in strong labor market, hot inflationary trends. 
  • USD/CAD pullback is losing steam right above 1.3730 support area.

The Canadian Dollar (CAD) is trading higher for the second consecutive session on Thursday, yet with weaker bullish momentum.

Strong US macroeconomic data and hawkish comments from New York Federal Reserve (Fed) President John Williams have provided some support to the USD.

US Initial Jobless Claims remained steady at relatively low levels last week. At the same time, the Philadelphia Fed Manufacturing Survey posted its best reading in a year, adding to the evidence of the strong US economic momentum.

Furthermore, US Existing Home Sales declined in March although their median price jumped 4.8% over the last twelve months, suggesting an inflationary contribution to the Consumer Price Index (CPI). In this context, Fed’s Williams has reiterated the idea that there is no urgency to rate cuts, putting the brakes on Canadian Dollar’s appreciation.

Daily digest market movers: USD/CAD finds support on back of strong US data

Canadian Dollar remains positive on Thursday despite USD trimming some losses. .
 

US Weekly Jobless Claims remain steady at 212K in the week of April 12, against expectations of an increase to 215K.
 

Philadelphia Fed Manufacturing Survey has increased to a 15.5 reading in April from 3.2 in March. The market had anticipated a decline to 1.5.
 

Existing Home Sales declined 4.3% in March after a 9.5% increase in February, although these data have been offset by the 4.8% yearly increment of the median sales price.
 

Fed’s Williams has stuck to the line that Fed decisions will be data-driven, reiterating that there is no rush to cut interest rates.
 

On Wednesday, US Beige Book reflected steady economic growth combined with sticky inflation expectations, a combination that has prompted investors to dial down Fed easing bets.
 

Bets for a Fed rate cut in July have dropped to 37% from 50% at the beginning of the week. Investors are now pricing in 40 bps of cuts in 2024, down from 150 bps in January.

Canadian Dollar price this week

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the Japanese Yen.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical analysis: USD/CAD in corrective pullback with bears looking at 1.3730 support area

The broader US Dollar trend remains positive, although the pair is going through a corrective pullback from overbought levels. Technical indicators are showing a moderate bearish momentum although the pair has stalled right above the 1.3730 support area,  following a five-day rally.

A deeper reversal below the mentioned 1.3730 level might find support at the 38.2% Fibonacci retracement level of April’s rally at 1.3705 and at  1.3660. On the upside, the immediate resistance is at 1.3845. Resistances are at 1.3784 and 1.3845.

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