- Fitch downgraded the US government’s top credit rating from AAA to AA+.
- US job openings remained consistent with tight labor market conditions.
- Canadian manufacturing activity showed a slight improvement in July.
Today’s USD/CAD price analysis is bullish. On Wednesday, the dollar held steady despite challenges as Fitch downgraded the US government’s top credit rating from AAA to AA+. This sparked concerns about the country’s fiscal outlook. However, the dollar received some backing from relatively resilient economic data.
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Notably, the dollar was supported by Tuesday’s economic data, which indicated that US job openings remained consistent with tight labor market conditions. This is despite reaching the lowest level in over two years in June.
Meanwhile, the Canadian dollar weakened to a three-week low against the US dollar. Broad-based greenback gains drove the decline. Additionally, there was a slowdown in Canada’s manufacturing sector for the third consecutive month.
According to Adam Button, chief currency analyst at ForexLive, the US dollar dominates the currency market, while the Canadian dollar is caught in this trend. The US economy shows resilience with relatively solid data on manufacturing and construction. In contrast, the Canadian economy is showing emerging cracks.
S&P Global’s measure of Canadian manufacturing activity showed a slight improvement in July, reaching 49.6, up from 48.8 in June. However, any reading below 50 indicates a contraction in the sector, a condition that has persisted since May.
Moreover, last Friday’s preliminary data indicated a 0.2% shrinkage in the Canadian economy for June. Economists are looking forward to Canada’s employment report for July to gauge the strength of domestic activity further.
USD/CAD key events today
Investors are waiting to receive the ADP nonfarm employment change and the crude oil inventories reports from the US.
USD/CAD technical price analysis: Strong bullish bias meets resistance at 1.3300.
On the charts, USD/CAD has made a solid bullish move that has broken above the 1.3225 resistance level. The price now sits well above the 30-SMA as the RSI nears the overbought region.
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The bullish bias is strong, but bulls are up against the 1.3300 resistance level. If they can puncture this level, we might see the price climb to the next resistance at 1.3350. However, if they fail, the price will likely pull back to retest the 30-SMA or the 1.3225 level.
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Saqib Iqbal
