USDCAD is moving in Ascending channel and market has reached higher low area of the channel
USD/CAD Decline Continues Amid Economic Uncertainty
The USD/CAD pair continues its downward trend, sitting around 1.3715 during Wednesday’s early Asian session. This movement is influenced by several factors, primarily the weaker Retail Sales report from the United States and rising crude oil prices. Let’s dive into the details to understand what’s happening and what might come next for the USD/CAD pair.
Impact of Weak Retail Sales on USD
Economic Slowdown in the US
Economic activity in the US has remained sluggish, particularly in the second quarter. The latest Retail Sales data showed a meager 0.1% month-on-month increase in May, following a 0.2% decline in April. This figure was below market expectations of a 0.2% rise, leading to a weakened US Dollar (USD).
Fed’s Response and Market Speculations
The disappointing Retail Sales report has triggered speculation about the Federal Reserve’s (Fed) future actions. There is growing anticipation that the Fed may cut interest rates in the coming months to stimulate the economy. On Tuesday, New York Fed President John Williams mentioned that he expected interest rates to gradually decrease as inflation pressures ease. Similarly, Boston Fed President Susan Collins highlighted that while progress on inflation has been made, it remains above the Fed’s 2% target, indicating cautiousness about declaring victory over inflation just yet.
Rising Crude Oil Prices and the Loonie
Crude Oil’s Influence on the Canadian Dollar
The Canadian Dollar (CAD), often referred to as the Loonie, is closely tied to crude oil prices due to Canada’s status as a major oil exporter to the United States. Recently, crude oil prices have reached a two-month high, providing support to the CAD. This upward movement in oil prices underpins the Loonie, contributing to the USD/CAD pair’s decline.
Bank of Canada’s Recent Moves
Interest Rate Decisions
The Bank of Canada (BoC) plays a crucial role in shaping the value of the Canadian Dollar. Last week, the BoC cut its benchmark policy rate by 25 basis points to 4.75%. This decision was in line with efforts to manage economic conditions and inflation. Former BoC governor David Dodge described the move as sensible, suggesting that future rate cuts would depend on continued progress on inflation.
USDCAD is moving in Descending channel and market has rebounded from the lower low area of the channel
Upcoming Deliberations
Later on Wednesday, the BoC will release its Summary of Deliberations, which traders will scrutinize for insights into the central bank’s future actions. The market will be looking for indications of additional interest rate cuts and the BoC’s assessment of the economic landscape.
Looking Ahead: What’s Next for USD/CAD?
As we look ahead, several factors will influence the USD/CAD pair:
- US Economic Data: Continued monitoring of economic indicators such as Retail Sales, employment figures, and inflation data will be crucial. Any signs of economic weakness could fuel further speculation about Fed rate cuts.
- Crude Oil Prices: The trajectory of crude oil prices will significantly impact the Canadian Dollar. A sustained rise in oil prices could strengthen the Loonie, pushing the USD/CAD pair lower.
- Central Bank Policies: Both the Federal Reserve and the Bank of Canada’s policy decisions and statements will be closely watched. Any hints of rate cuts or changes in monetary policy could cause significant movements in the currency pair.
USDCAD is moving in box pattern and market has fallen from the resistance area of the pattern
Summary
The USD/CAD pair’s recent decline around 1.3715 is primarily driven by weak US Retail Sales data and rising crude oil prices. The speculation about potential Fed rate cuts adds further pressure on the USD, while the strong performance of crude oil supports the CAD. Future movements in this currency pair will largely depend on upcoming economic data, central bank decisions, and trends in crude oil prices. Keep an eye on these factors to navigate the market effectively.
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