USDCAD is moving in box Pattern and market has rebounded from the support area of the pattern
Why USD/CAD is Struggling and What It Means for You
USD/CAD has been facing a tough time lately, especially around the 1.3630 mark. In the early Asian session on Friday, it continued to show signs of weakness. But what’s causing this, and what does it mean for traders? Let’s break it down.
US Inflation and Fed Rate Cut Expectations
Lower US Inflation: A Surprise for Many
The latest US inflation data has taken many by surprise. In June, the Consumer Price Index (CPI) saw a decline of 0.1% month-on-month, the lowest level in over three years. This has created quite a buzz in the financial world. For those not familiar, the CPI measures the average change in prices over time that consumers pay for a basket of goods and services.
Annual Inflation: What’s the Big Deal?
On an annual basis, the headline CPI increased by 3.0% in June, down from 3.3% in May and below the market consensus of 3.1%. This lower-than-expected inflation has fueled speculation that the Federal Reserve might cut interest rates sooner than previously thought.
Core CPI: The Focus on Stable Prices
The core CPI, which excludes volatile food and energy prices, rose by 3.3% year-on-year in June. This was also lower than the market’s expectation of 3.4%. These softer inflation readings have led investors to increase their bets on a Fed rate cut in September.
Market Reactions and Future Expectations
Fed Rate Cut Bets on the Rise
In response to the new inflation data, there has been a significant shift in market expectations regarding the Federal Reserve’s next move. According to the CME Group’s FedWatch Tool, the odds of a rate cut in September have jumped to nearly 89%, up from 73% earlier in the week.
Impact on the US Dollar
This shift in expectations has had a direct impact on the US Dollar, causing it to weaken. As the USD weakens, pairs like USD/CAD also feel the pressure.
Canadian Economic Factors
Unemployment Rate: A Key Indicator
On the Canadian front, the Unemployment Rate rose to 6.4%, and the economy lost 1,400 jobs in June. This has prompted speculation that the Bank of Canada might also consider cutting interest rates to support the economy.
Crude Oil Prices: A Double-Edged Sword
Canada is a major crude oil exporter, and the recent rebound in crude oil prices might help support the Canadian Dollar. Higher oil prices can boost the economy and strengthen the currency. However, if the overall economic data remains weak, this support might be limited.
USDCAD is moving in box pattern and market has fallen from the resistance area of the pattern
What This Means for USD/CAD Traders
Short-Term Outlook
In the short term, USD/CAD is likely to remain under pressure due to the weaker US inflation data and the rising expectations of a Fed rate cut. Traders should keep an eye on upcoming economic reports from both the US and Canada, as these will provide further clues about the future direction of the pair.
Long-Term Considerations
For those looking at the long-term picture, it’s important to consider the broader economic trends. The US economy still faces challenges, and any significant changes in monetary policy by the Federal Reserve will have a lasting impact on USD/CAD.
Crude Oil Influence
Keep in mind the influence of crude oil prices on the Canadian Dollar. Any significant changes in oil prices can lead to volatility in USD/CAD. It’s always a good idea to stay informed about the latest developments in the oil market.
Final Summary
The recent weakness in USD/CAD around the 1.3630 mark is driven by several factors, including lower US inflation readings and rising expectations of a Fed rate cut. On the Canadian side, a higher unemployment rate and job losses are weighing on the Loonie. However, the rebound in crude oil prices might offer some support. For traders, it’s crucial to stay updated on economic data and market expectations to navigate the current volatility. Understanding these dynamics can help you make more informed trading decisions.
Don’t trade all the time, trade forex only at the confirmed trade setups
Get more confirmed trade signals at premium or supreme – Click here to get more signals , 2200%, 800% growth in Real Live USD trading account of our users – click here to see , or If you want to get FREE Trial signals, You can Join FREE Signals Now!
