Daily Analysis For USD/CAD  14-06-2023

Daily Analysis For USD/CAD 14-06-2023

USD/CAD Analysis


Key Points: -


·       USD/CAD is struggling to maintain its bounce from a four-month low and remains under pressure near the intraday lows.


·       The price of WTI crude oil has trimmed its weekly losses due to a decline in the US Strategic Petroleum Reserve (SPR), which has renewed hopes for oil demand, particularly in the context of a weaker US dollar.


·       The recent US inflation data supports expectations that the Federal Reserve (Fed) may pause its rate hike trajectory, which has put downward pressure on the US dollar. This has implications for USD/CAD.


·       In terms of upcoming events, the focus for traders of the Canadian dollar (CAD) pair will be on the Federal Open Market Committee (FOMC) projections and the speech by Fed Chair Jerome Powell. These will provide important insights and guidance for the direction of the pair.


·       It is essential for USD/CAD traders to closely monitor these events to gain clarity and determine the future course of the pair.


Today's Scenario: -


Despite the sluggishness of the US dollar, USD/CAD is currently experiencing selling pressure as market participants prepare for the Federal Reserve's interest rate decision. The pair is trading with minor losses around 1.3300. The decline in the USD/CAD pair is being driven by the recovery in WTI crude oil, which is Canada's main export item. Additionally, there are hopes that the US central bank will refrain from raising interest rates.


WTI crude oil has seen minor gains and is trading around $69.60. It has pared its weekly losses for the third consecutive week, and this has supported the USD/CAD pair. The expectation of increased oil demand in the US, as the country taps into its Strategic Petroleum Reserves (SPR) to stabilize energy prices, is also contributing to the strength of crude oil prices. Notably, the US SPR inventory is currently at 353 million barrels, which is a 33% decrease compared to the levels seen a year ago.


Meanwhile, the US dollar remains uncertain and is trading near three-week lows, with the US Dollar Index (DXY) retreating from its intraday high to around 103.30. The greenback is being affected by the market's dovish expectations regarding the Federal Reserve. According to the latest reading from the CME FedWatch Tool, there is a more than 90% probability of no rate hike by the Fed in its upcoming monetary policy meeting, up from around 75% probability previously. This shift in expectations can be attributed to the downbeat US inflation data, with the Consumer Price Index (CPI) dropping more than expected to 0.1% on a monthly basis and 4.0% on a yearly basis. However, the Core CPI figures, which exclude food and energy, met forecasts at 0.4% monthly and 5.3% yearly. The decline in the headline CPI justifies the market's anticipation of no rate hike by the Federal Reserve.


The cautious optimism prevailing in the markets, as indicated by the S&P 500 Futures and US Treasury bond yields, is also putting downward pressure on the US dollar and, consequently, the USD/CAD pair.


Looking ahead, the release of the US Producer Price Index (PPI) for May and other risk catalysts will likely influence USD/CAD trading before the Federal Reserve's decision. Traders will closely monitor the central bank's economic forecasts, dot-plot, and the press conference by Chairman Jerome Powell for clearer guidance on the future direction of the pair.

Diagram of USD/CAD: -



Economic Events: -


Date      Event                                                                                            Impact        Currency

 02:00   (United States) API Crude Oil Stock Change                  Medium             USD

 04:15   (New Zealand) Current Account                                                  Medium NZD

 05:30   (New Zealand) Food Inflation YoY                                         Low NZD

 10:00   (Netherlands) Balance of Trade                                                          Low  EUR

 10:30   (Finland) Inflation Rate YoY                                                                 Low  EUR

 10:30   (Finland) Inflation Rate MoM                                                              Low  EUR

 10:30   (Finland) CPI                                                                                         Low     EUR

 11:30   (United Kingdom) GDP 3-Month Avg                                          Medium GBP

 11:30   (United Kingdom) Goods Trade Balance Non-EU                              High GBP

 11:30   (United Kingdom) Balance of Trade                                      Low GBP

 11:30   (United Kingdom) Construction Output YoY                       Low GBP

 11:30   (United Kingdom) Industrial Production YoY                       Low GBP

 11:30   (United Kingdom) Industrial Production MoM                            Medium             GBP

 11:30   (United Kingdom) Manufacturing Production YoY             Low GBP

 11:30   (United Kingdom) Manufacturing Production MoM    Medium            GBP

 11:30   (United Kingdom) Goods Trade Balance                                            High GBP

 11:30   (United Kingdom) GDP YoY                                                                 Low  GBP

 11:30   (United Kingdom) GDP MoM                                                             High  GBP

 11:30   (Germany) Wholesale Prices MoM                               Medium EUR

 11:30   (Germany) Wholesale Prices YoY                                  Medium EUR

 12:30   (China) FDI (YTD) YoY                                                                   Medium   CNY

 12:30   (Slovakia) Inflation Rate MoM                                                            Low  EUR

 12:30   (Slovakia) Inflation Rate YoY                                                                Low  EUR

 12:30   (Slovakia) Core Inflation Rate MoM                                      Low EUR

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

 12:30   (Slovakia) CPI                                                                                      Low      EUR

 13:30   (France) IEA Oil Market Report                                                   Medium  EUR

 14:30   (Euro Area) Industrial Production MoM                                     Medium EUR

 14:30   (Euro Area) Industrial Production YoY                                              Low  EUR

 14:30   (Montenegro) GDP Growth Rate YoY                                                Low  EUR

 15:00   (Germany) 10-Year Bund Auction                               Medium  EUR

 15:30   (Portugal) Inflation Rate MoM                                                          Low    EUR

 15:30   (Portugal) Inflation Rate YoY                                                             Low    EUR

 15:30   (Portugal) CPI                                                                                     Low       EUR

 15:30   (Ireland) Residential Property Prices YoY                                          Low  EUR

 15:30   (Ireland) Residential Property Prices MoM                       Low EUR

 16:30   (United States) MBA 30-Year Mortgage Rate                Medium USD

 16:30   (United States) MBA Mortgage Applications                      Low USD

 16:30   (United States) MBA Mortgage Refinance Index                              Low USD

 16:30   (United States) MBA Mortgage Market Index                                  Low USD

 16:30   (United States) MBA Purchase Index                                                 Low  USD

 17:00   (United Kingdom) NIESR Monthly GDP Tracker                               Low GBP

 18:00   (Canada) New Motor Vehicle Sales                                     Low  CAD

 18:00   (United States) Core PPI MoM                                                  Medium    USD

 18:00   (United States) Core PPI YoY                                                             Low    USD

 18:00   (United States) PPI YoY                                                                      Low     USD

 18:00   (United States) PPI MoM                                                     High  USD

 20:00   (United States) EIA Heating Oil Stocks Change                                  Low USD

 20:00   (United States) EIA Refinery Crude Runs Change                              Low USD

 20:00   (United States) EIA Crude Oil Stocks Change               Medium USD

 20:00   (United States) EIA Distillate Stocks Change                      Low USD

 20:00   (United States) EIA Gasoline Production Change                             Low USD

 20:00   (United States) EIA Crude Oil Imports Change                                 Low USD

 20:00   (United States) EIA Gasoline Stocks Change                Medium USD

 20:00   (United States) EIA Cushing Crude Oil Stocks Change         Low              USD

 20:00   (United States) EIA Distillate Fuel Production Change         Low              USD

 21:00   (United States) 17-Week Bill Auction                                                 Low USD

 23:30   (United States) Fed Interest Rate Decision                          High              USD

 23:30   (United States) FOMC Economic Projections                        High              USD

 23:30   (United States) Interest Rate Projection - 1st Yr                           Medium            USD

 23:30   (United States) Interest Rate Projection - 2nd Yr                         Medium            USD

 23:30   (United States) Interest Rate Projection - Current        Medium            USD

 23:30   (United States) Interest Rate Projection - Longer                        Medium             USD


Buy Scenario: -


On the buying side of USD/CAD pair, a break above the high of June 8 at 1.3388 could drive the pair towards the high of June 5 at 1.3462 and the psychological resistance level at 1.3500.  Till we do not advise to buy USD/CAD.


Sell Scenario: -


The USD/CAD pair has recently tested the demand zone between 1.3270 and 1.3300 on a daily basis. Following the Federal Reserve's interest rate decision, the Loonie is expected to experience increased volatility. The presence of a downward-sloping 10-period Exponential Moving Average (EMA) at around 1.3380 suggests an extremely bearish short-term trend.


The Relative Strength Index (RSI) with a period of 14 has entered the bearish range of 20.00 to 40.00, indicating an ongoing downside momentum.


If the pair breaks below the low of June 13 at 1.3286, it could expose the USD/CAD to the low of November 15, 2022, at 1.3226, followed by the psychological support level at 1.3200. Till we do not advise to sell USD/CAD.


Support and Resistance Level: -

 Support              Resistance  

 S1 1.3277   -     R1 1.3369

 S2 1.3235  -      R2 1.3420

 S3 1.3184  -      R3 1.3462


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