- USD/CAD declines slightly to 1.3730 after reaching a five-month peak around 1.3800.
- The US Dollar stabilizes close to 106.00 as attention turns towards US Retail Sales figures.
- The outlook for potential rate cuts by the Bank of Canada will be shaped by Canada’s inflation data.
In Monday’s European session, the USD/CAD pair retreats to 1.3730. While the Canadian Dollar weakens, the US Dollar maintains a narrow range, suggesting strength in the Loonie. The US Dollar Index (DXY) trades sideways, hovering near a six-month high around 106.00.
Short-term demand for the Canadian Dollar remains robust as the Federal Reserve (Fed) is expected to uphold restrictive interest rates for an extended period. Fed policymakers perceive no immediate need for rate cuts due to sustained higher levels of consumer price inflation.
Investor focus shifts to the upcoming United States Retail Sales data for March, which will influence speculation regarding Fed rate adjustments. Forecasts anticipate a slower growth rate of 0.3% compared to the previous reading of 0.6%. A positive Retail Sales report would bolster inflation expectations, potentially dampening market projections for Fed rate cuts, currently anticipated in the September meeting.
Looking ahead, the Canadian Dollar’s performance will be guided by the release of the Consumer Price Index (CPI) data for March on Tuesday. This inflation data will offer insights into the timing of potential interest rate reductions by the Bank of Canada (BoC).
USD/CAD experiences a robust rally following a breakout of the Ascending Triangle chart pattern on the daily timeframe. This pattern signifies a sharp contraction in volatility characterized by small price movements and low trading volume. A breakout typically results in larger price movements to the upside accompanied by increased buying volume.
The upward-sloping 20-day Exponential Moving Average (EMA) near 1.3610 indicates further upside potential.
With the 14-period Relative Strength Index (RSI) entering the bullish range of 60.00-80.00, bullish momentum is evident.
A fresh upward movement for the Loonie would occur upon surpassing the April 12 high at 1.3787, potentially driving towards the November 4 high at 1.3844, followed by the November peak at 1.3900.
Conversely, a decline below the April 9 low at 1.3547 would expose the asset to psychological support at 1.3500. Further downside could target the February 22 low at 1.3441 following a breakdown below this level.
USD/CAD daily chart
USD/CAD
