USD/CAD Rate Eyes Monthly-Low as Bearish Sequence Unfolds

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Canadian Dollar Talking Points

USD/CAD stays below stress even as Canada Retail Sales contracts 0.2% in July, and the alternate fee seems to be on monitor to check the monthly-low (1.2962) as it extends the sequence of decrease highs & lows from the earlier week.

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USD/CAD Rate Eyes Monthly-Low as Bearish Sequence Unfolds

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USD/CAD carves a bearish sequence following the surprising uptick in Canada’s Consumer Price Index (CPI), with the latest developments elevating the danger for a bigger pullback within the dollar-loonie alternate fee as indicators of a sturdy economic system places stress on the Bank of Canada (BoC) to additional normalize financial coverage.

The latest slowdown in retail gross sales might do little to change the financial coverage outlook as final month’s studying was revised to 2.2% from an preliminary print of 2.0%, and the upward adjustment might preserve the BoC on monitor to undertake a less-accommodative stance as the ‘Governing Council expects that larger rates of interest might be warranted to maintain inflation close to goal.’

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However, latest feedback from Governor Stephen Poloz & Co. counsel the central financial institution is in no rush to spice up borrowing-costs as ‘household spending is being dampened by larger rates of interest and tighter mortgage lending pointers,’ and the BoC might follow the sidelines on the subsequent assembly on September 5 as ‘the Bank is monitoring the economic system’s adjustment to larger rates of interest and the evolution of capability and wage pressures, as effectively as the response of corporations and shoppers to commerce actions.

With that stated, recent rhetoric from Federal Reserve officers might finally sway the near-term outlook for USD/CAD as Chairman Jerome Powell is scheduled to talk on the Fed Economic Symposium in Jackson Hole, Wyoming, however latest value motion retains the draw back targets on the radar as each value and the Relative Strength Index (RSI) monitor the bearish formations from late-June. Sign up and join DailyFX Currency Analyst David Song LIVE for a chance to debate potential commerce setups!

USD/CAD Daily Chart

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  • The monthly-low (1.2962) sits on the radar as USD/CAD carves a sequence of decrease highs & lows, with a break/shut beneath the 1.2980 (61.8% retracement) to 1.3030 (50% growth) area elevating the danger for a transfer again in direction of 1.2830 (38.2% growth), which largely traces up with the 200-Day SMA (1.2837).
  • Next draw back area of curiosity is available in round 1.2720 (38.2% retracement) to 1.2770 (38.2% growth) adopted by the 1.2620 (50% retracement) space.

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— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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