USD/CAD Analysis

Key Points: -

·       The USD/CAD pair is currently in a consolidation phase, stabilizing after experiencing recent losses and reaching its lowest level since September 2022.

·       A slight recovery in the US Dollar from its multi-week low is providing some support for the pair.

·       However, the uncertain policy outlook of the Federal Reserve may limit any significant upside potential for the US Dollar and, consequently, the USD/CAD pair.

Today's Scenario: -

USD/CAD is showing signs of recovery as it consolidates its recent losses near the yearly low, reaching an intraday high around 1.3215 on Monday. This marks a reversal of the two-day downtrend and can be attributed to the broader recovery of the US Dollar. Additionally, the decline in prices of Canada's main export, WTI crude oil, along with concerns over China's growth forecasts and the potential influx of oil from Iran due to a possible US-Iran deal, are weighing on WTI crude oil prices.

The sentiment is further influenced by Federal Reserve policymakers expressing concerns about a July rate hike. Despite improved preliminary readings of the University of Michigan Consumer Sentiment Index (CSI) for June, easing US inflation expectations have tempered the strength of the US Dollar. Nevertheless, recent hawkish comments from Fed policymakers have helped the US Dollar consolidate its losses, following a week where the US Dollar Index experienced its largest drop since early January. The combination of weaker US inflation, disappointing retail sales, and the news regarding US-China relations has supported the USD/CAD bulls.

It is worth noting that S&P 500 Futures are showing mild losses, following the trend of Wall Street benchmarks, while yields have been relatively stagnant with a slight upward bias.

Looking ahead, the absence of US traders on Monday will limit the USD/CAD pair's movements. However, important events to watch for clear direction include Fed Chairman Powell's bi-annual testimony and the release of PMIs for June. Additionally, the outcomes of Canadian industrial production and retail sales will be significant factors to monitor.

Diagram of USD/CAD: -

Economic Events: -

Date      Event                                                                                                             Impact       Currency

 04:00   (New Zealand) Services NZ PSI                                                                         Low     NZD

 04:00   (New Zealand) Composite NZ PCI                                                     Low    NZD

 05:30   (United States) Juneteenth                                                                            None     USD

 09:05   (Japan) 52-Week Bill Auction                                                                           Low     JPY

 13:30   (Australia) Myfxbook AUDUSD Sentiment                                 Medium AUD

 13:30   (Switzerland) Myfxbook USDCHF Sentiment                              Medium CHF

 13:30   (Japan) Myfxbook USDJPY Sentiment                                                      Medium   JPY

 13:30   (European Union) Myfxbook EURUSD Sentiment                                   Medium  EUR

 13:30   (United Kingdom) Myfxbook GBPUSD Sentiment                                   Medium  GBP

 13:30   (Canada) Myfxbook USDCAD Sentiment                                                 Medium    CAD

 13:30   (New Zealand) Myfxbook NZDUSD Sentiment                                        Medium  NZD

 13:30   (Euro Area) ECB Survey of Monetary Analysts                                                Low  EUR

 15:00   (Germany) 12-Month Bubill Auction                                                               Low    EUR

 16:00   (Portugal) Current Account                                                                              Low     EUR

 16:30   (Euro Area) ECB Lane Speech                                                                           Low     EUR

 17:10   (Euro Area) ECB Schnabel Speech                                                     Low    EUR

 18:00   (Canada) PPI YoY                                                                                Low       CAD

 18:00   (Canada) PPI MoM                                                                                           Low       CAD

 18:00   (Canada) Raw Materials Prices YoY                                                   Low    CAD

 18:00   (Canada) Raw Materials Prices MoM                                                              Low    CAD

 18:30   (France) 3-Month BTF Auction                                                                        Low     EUR

 18:30   (France) 12-Month BTF Auction                                                                      Low     EUR

 18:30   (France) 6-Month BTF Auction                                                                        Low     EUR

 19:30   (United States) NAHB Housing Market Index                              Medium USD

 23:30   (Euro Area) ECB Guindos Speech                                                      High   EUR

Buy Scenario: -

Although there has been a recent corrective bounce in USD/CAD, primarily driven by oversold conditions indicated by the RSI (14), sellers continue to focus on the pair unless it surpasses the previous support line extending from November 2022, which is currently around 1.3330 at the time of writing.  Till we do not advise to buy USD/CAD.

Sell Scenario: -

The USD/CAD pair, currently trading at $1.32044, has dropped below a significant support level and reached new lows, coinciding with the strengthening of oil markets.

The relative strength index (RSI) is nearing the oversold territory, indicating a potential opportunity for the USD/CAD pair to gather further downward momentum following a successful test of the crucial support zone around the 1.3250 level. Till we do not advise to sell USD/CAD.

Support and Resistance Level: -



 Support              Resistance  

 S1 1.3171   -     R1 1.3232

 S2 1.3143  -      R2 1.3267

 S3 1.3109  -      R3 1.3294