- The dollar weakened on Tuesday following its gain the day before.
- Canadian economic activity grew in January at its fastest rate in eight months.
- Investors are anticipating Fed Chair Jerome Powell’s address later today.
Today’s USD/CAD price analysis is bearish. The dollar weakened on Tuesday following its gain the day before. However, it was still close to a one-month high as traders increased their expectations of how much the US Federal Reserve would need to raise interest rates to control inflation.
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Markets were beginning to recover from the shock of the stunning US employment report released on Friday, which revealed that nonfarm payrolls increased by 517,000 jobs in January, indicating a strong labor market.
The Fed’s rate-hiking cycle was expected to end soon, so the data caught traders off guard and gave the dollar a boost, though it gave back some gains in Tuesday’s trading.
According to data from the Ivey Purchasing Managers Index (PMI), Canadian economic activity grew in January at its fastest rate in eight months as employment increased and supplier deliveries quickened. This boosted the Canadian dollar.
The seasonally adjusted index increased to 60.1, which is a new high. The historical data was updated to reflect that the index stood at 49.3 rather than 33.4 in December.
The Ivey PMI tracks changes in economic activity from month to month, as reported by a panel of purchasing managers from throughout Canada. A value above 50 indicates an increase in activity.
The supplier deliveries index increased to 52.3 from 49.1, while the employment indicator increased to an adjusted 60.5 from 59.5 in December.
USD/CAD key events today
Investors are anticipating Fed Chair Jerome Powell’s address later today. This speech can offer hints about upcoming policy moves.
USD/CAD technical price analysis: Modest pullback from the 1.3450 resistance
The 4-hour chart shows USD/CAD trading above the 30-SMA with the RSI above 50, supporting bullish momentum. Bulls have had control since the price bounced off the 1.3275 support level. The price went on to break above the 1.3350 resistance and push to the 1.3450 resistance, where it paused.
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Bears returned for a pullback after the bulls failed to trade above the 1.3450 level. There might be a consolidation at this level before the price breaks above the resistance or heads for the 30-SMA.
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Saqib Iqbal
