Published on Jun 13, 2023

Daily Analysis For USD/CAD 13-06-2023

USD/CAD Analysis

Key Points: -

· Following a period of relative stability in oil prices, the USD/CAD has experienced a recovery from 1.3340.

· The USD Index is facing challenges in maintaining its position above 103.20 due to a decrease in its attractiveness caused by a decline in risk appetite.

· The temporary decline in Canadian Employment is not significant enough to compel the Bank of Canada (BoC) to shift back to a neutral stance.

Today's Scenario: -

The USD/CAD pair has experienced a significant recovery from 1.3340 during the European session. The Canadian dollar has gained strength due to the stabilization of oil prices following a sharp decline to around $67.00. However, the US Dollar Index (DXY) is currently struggling to maintain its position above the key level of 103.20, as the diminishing risk appetite has reduced its appeal.

In Europe, S&P500 futures have recorded notable gains, driven by expectations that the Federal Reserve (Fed) will adopt a neutral stance on interest rates in its monetary policy statement. The USD Index is facing challenges in sustaining its auction above 103.20, primarily due to the waning appeal of risk appetite.

Later today, the release of the United States Consumer Price Index (CPI) data for May will be highly significant. Analysts at Credit Suisse anticipate a decline in core CPI inflation to 0.3% MoM, marking a welcome decrease after five consecutive months of 0.4% MoM. The year-on-year (YoY) reading is expected to decrease to 5.2%, while headline inflation is projected to decline to 0.1% MoM.

The impact of a weakened USD Index is also evident in US Treasury yields, with the yields on 10-year US Treasury bonds falling to approximately 3.72%.

Meanwhile, the Canadian Dollar is displaying resilience as investors remain hopeful that the Bank of Canada (BoC) will raise interest rates further to combat persistent inflationary pressures. Despite recent weakness in Canadian Employment data, which revealed a higher-than-expected Unemployment Rate after several months, market sentiment suggests that the BoC Governor, Tiff Macklem, will not revert to a neutral stance based solely on this isolated weakness.

On the oil front, prices have experienced significant selling pressure, as the Eurozone, joining China, is expected to exhibit weak demand due to growing concerns of a recession. It should be noted that Canada is a major exporter of oil to the United States, and lower oil prices would undoubtedly impact the Canadian Dollar.

Diagram of USD/CAD: -

Economic Events: -

Date Event Impact Currency

4:15 (New Zealand) Visitor Arrivals YoY Low NZD

5:20 (Japan) BSI Large Manufacturing QoQ Low JPY

6:00 (Australia) Westpac Consumer Confidence Change High AUD

6:00 (Australia) Westpac Consumer Confidence Index High AUD

7:00 (Australia) NAB Business Confidence High AUD

11:30 (Germany) Harmonised Inflation Rate MoM Low EUR

11:30 (Germany) Harmonised Inflation Rate YoY Low EUR

11:30 (Germany) Inflation Rate MoM Medium EUR

11:30 (Germany) Inflation Rate YoY Medium EUR

11:30 (Germany) CPI High EUR

11:30 (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr) Low GBP

11:30 (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr) Medium GBP

11:30 (United Kingdom) Unemployment Rate High GBP

11:30 (United Kingdom) Claimant Count Change High GBP

11:30 (United Kingdom) Employment Change High GBP

11:30 (United Kingdom) HMRC Payrolls Change Low GBP

12:30 (Lithuania) Current Account Low EUR

12:30 (Spain) CPI High EUR

12:30 (Spain) Core Inflation Rate YoY Low EUR

12:30 (Spain) Harmonised Inflation Rate MoM Low EUR

12:30 (Spain) Harmonised Inflation Rate YoY Low EUR

12:30 (Spain) Inflation Rate MoM Low EUR

12:30 (Spain) Inflation Rate YoY Low EUR

13:30 (China) Total Social Financing Low CNY

13:30 (China) New Yuan Loans Low CNY

13:30 (China) M2 Money Supply YoY Low CNY

13:30 (China) Outstanding Loan Growth YoY Low CNY

14:10 (Spain) 3-Month Letras Auction Low EUR

14:30 (Euro Area) ZEW Economic Sentiment Index Medium EUR

14:30 (Germany) ZEW Economic Sentiment Index High EUR

14:30 (Germany) ZEW Current Conditions Low EUR

14:30 (United Kingdom) 10-Year Treasury Gilt Auction Low GBP

14:40 (Italy) 3-Year BTP Auction Low EUR

14:40 (Italy) 7-Year BTP Auction Low EUR

14:40 (Italy) 30-Year BTP Auction Low EUR

15:00 (Germany) 5-Year Bobl Auction Low EUR

15:15 (Euro Area) ECB Enria Speech Low EUR

15:30 (Latvia) Current Account Low EUR

15:30 (United States) NFIB Business Optimism Index Low USD

17:30 (Ecuador) Balance of Trade Low USD

18:00 (United States) Core Inflation Rate MoM Medium USD

18:00 (United States) Inflation Rate MoM High USD

18:00 (United States) Core Inflation Rate YoY High USD

18:00 (United States) Inflation Rate YoY High USD

18:00 (United States) CPI High USD

18:00 (United States) CPI s.a High USD

18:15 (Germany) Current Account Low EUR

18:25 (United States) Redbook YoY Low USD

19:30 (United Kingdom) BoE Gov Bailey Speech Medium GBP

20:30 (United Kingdom) BoE Dhingra Speech Low GBP

21:00 (United States) 52-Week Bill Auction Low USD

22:30 (United States) 30-Year Bond Auction Low USD

Buy Scenario: -

The USD/CAD pair is currently finding support around 1.3330, marked by the RSI (14) line below the 50.0 level and an upward-sloping support line since mid-November 2022. Till we do not advise to buy USD/CAD.

Sell Scenario: -

However, the presence of bearish signals from the MACD indicator and the continued trading of the Loonie pair below the 200-day Exponential Moving Average (EMA), which is near 1.3410 at the moment, gives hope to sellers. Till we do not advise to sell USD/CAD.