Sat, June 15, 2024

Canadian Dollar Moves Higher Ahead Of The Weekend

The Greenback: A pile of Canadian dollar bills.

Quick Look:

  • The Canadian Dollar gains as USD/CAD tests key support at 1.2650.
  • Mixed U.S. data with Personal Income up 0.2%, Spending up 0.8%, and PMI down to 60.7 in September.
  • WTI oil prices are volatile between $74-$76 per barrel, influenced by OPEC+ production speculation.
The Canadian Dollar has shown strength on weekends, with USD/CAD testing key support at 1.2650. This movement comes amid fluctuating economic indicators and market sentiments in the United States and Canada.

Mixed U.S. Data: Personal Income Up 0.2%, PMI Down to 60.7

The U.S. Dollar Index, a crucial measure of the greenback’s strength against major currencies, tests support at 94. This level is significant for the USD/CAD dynamic. Recent U.S. economic data has been mixed. U.S. Personal Income increased by 0.2% in August, while Personal Spending grew by 0.8%, indicating continued consumer activity.

However, the U.S. Manufacturing PMI declined to 60.7 in September, suggesting a slowdown. On a positive note, U.S. Consumer Sentiment improved to 72.8 in September, showing consumer optimism.

WTI Oil Prices Fluctuate Between $74 and $76 Per Barrel

WTI oil prices have been volatile, trading between $74 and $76 per barrel. This fluctuation is driven by speculation about OPEC+ potentially increasing production by 800,000 barrels per day in November. Oil prices significantly impact the Canadian economy due to its substantial oil exports.

Canadian Dollar Faces Key Support at 1.2650, Resistance at 1.2685

From a technical perspective, USD/CAD is navigating several key levels. Primary support is at 1.2650, followed by 1.2640 (50-day EMA), 1.2625, and 1.2590. On the resistance side, 1.2685 (20-day EMA) is the immediate hurdle, with subsequent resistances at 1.2710 and 1.2730.

Fed’s Hawkish Stance vs BoC’s Dovish Outlook

The past week has highlighted a divergence in monetary policy expectations between the U.S. Federal Reserve and the Bank of Canada, contributing to a bullish sentiment for USD/CAD.

The dollar weakened earlier in Canada due to easing inflation in May, increasing the likelihood of a dovish stance from the Bank of Canada. Conversely, some Federal Reserve policymakers suggest that rate hikes might be necessary if inflation persists, indicating a more hawkish approach.

U.S. and Canadian GDP Reports Crucial for Policy Direction

Upcoming GDP reports from the U.S. and Canada will be pivotal. Positive U.S. GDP data could solidify expectations of continued restrictive policy from the Fed. In contrast, Canadian GDP figures will be scrutinised for signs of economic cooling that might influence the Bank of Canada’s policy direction.

USD/CAD Bullish Trend with Key Resistance at 1.3800

USD/CAD has experienced a bullish trend supported by positive U.S. economic data and hawkish Fed minutes. The Federal Open Market Committee (FOMC) minutes revealed a commitment to maintaining a restrictive policy stance to combat inflation. Additionally, U.S. PMI data indicated stronger-than-expected business activity, bolstering the case for a resilient U.S. economy.

Canadian data pointed to cooling inflation, increasing speculation that the Bank of Canada might lean towards rate cuts. This policy divergence has created a favourable environment for USD/CAD bulls. The pair remains in a bullish trend, currently consolidating within a range. Key resistance is at 1.3800, while support lies at 1.3600. The price is trading near a bullish trendline, suggesting a likely retest of the 1.3800 resistance soon.

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