- The Canadian dollar gained ground amid a rally in equity markets.
- Data indicated that US business activity was nearing stagnation.
- Canadian retail sales experienced a modest growth of 0.1% in June.
Today’s USD/CAD forecast is bearish as the pair hovers near Wednesday’s lows. The Canadian dollar rose against the dollar on Wednesday, boosted by a rally in equity markets. Moreover, this recovery followed a period of weakness that had pushed the currency to its lowest point in almost three months.
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According to Darren Richardson, COO at Richardson International Currency Exchange Inc., improved oil prices, a rebound in market sentiment, and positive equity movement boosted the Canadian dollar. Additionally, some profit-taking and adjustments after recent losses in the Canadian dollar contributed to the trend.
Moreover, the decline in the US dollar played a role in supporting the Canadian dollar. The greenback faced losses against various currencies, as data indicated that US business activity was nearing stagnation.
Meanwhile, Canadian retail sales experienced a modest growth of 0.1% in June compared to the previous month, primarily driven by car sales. This suggests subdued consumer spending and could influence the Bank of Canada’s stance on interest rate hikes. Economists had predicted flat June sales and a 0.3% rise, excluding automobile sales. Furthermore, flash estimates from the agency indicate that retail sales likely increased by 0.4% in July.
Tiago Figueiredo, an economist at Desjardins Group, observed that Canadian consumer spending remained sluggish in June. Consequently, this data could encourage central bankers to maintain the current interest rates throughout the year.
USD/CAD key events today
Investors will watch out for data from the US showing core durable goods orders and initial jobless claims. They expect a drop in core durable goods orders and a slight increase in jobless claims.
USD/CAD technical forecast: Bears must breach 1.3500 to validate trend reversal.
On the charts, USD/CAD is trading below the 30-SMA. This comes after bears found resistance at the 1.3600 level. They then made a bearish engulfing candle that broke below the 30-SMA.
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Although bears have shown strength, they have not yet taken over as the RSI trades slightly above 50. This shows bullish momentum is still strong. Moreover, the price has paused at the 1.3500 key support level. Bears must cross below 1.3500 to confirm a reversal with the RSI below 50.
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