USD/CAD: Focus on Economic Indicators and BoC Macklem

USD/CAD Analysis: Focus on Economic Indicators and BoC Macklem. Stay informed for strategic currency trading decisions.

USD/CAD ANALYSIS & KEY POINTS

• Despite a moderation in Canadian inflation, the Canadian dollar remains resilient around the 1.3700 base.
• Upcoming focus on US durable goods orders, consumer sentiment, and the Bank of Canada’s Macklem remarks.
• The question arises: Will the established channel support hold once again?

USD/CAD: Focus on Economic Indicators and BoC Macklem

Following the recent Canadian CPI report and FOMC minutes, the Canadian dollar held steady around the 1.3700 mark. Both headline and core inflation in Canada dipped, prompting speculation about a potential shift to a more neutral/dovish stance by the Bank of Canada (BoC). The FOMC minutes have had minimal impact on the US front, given the significant changes in market sentiment since November and recent economic data indicating a slowdown in the US economy. Today’s releases, including durable goods orders and consumer sentiment, are expected to contribute to this narrative, potentially exerting downward pressure on the USD.

Today, BoC Governor Tiff Macklem will speak, and his recent comments on minimal growth and softening inflation may suggest a cautious tone. Presently, money markets are pricing roughly 80 basis points of cumulative rate cuts by December 2024, with monetary easing expected to commence around April/June.

Crude oil remains a significant factor for the Canadian dollar, with market attention turning to the OPEC+ meeting this weekend. The decision to extend voluntary production cuts into the next year could influence the loonie’s performance. A noteworthy concern for CAD bulls is the recent CFTC positioning, indicating an increase in shorts to the highest level since 2017. Markets may attribute this to the BoC initiating its hiking cycle ahead of the Fed, possibly causing an anticipated downward trajectory.

TECHNICAL ANALYSIS

The USD/CAD reveals the pair testing the long-term channel support zone. A weekly close below this region may trigger additional CAD strength. The Relative Strength Index (RSI) signals market indecision, emphasizing the need for caution among traders during this period.

Key resistance levels

1.3899

1.3800

Channel support

Key support levels

1.3700

1.3668/50-day MA

1.3600

IG CLIENT SENTIMENT DATA: BEARISH

IG Client Sentiment (IGCS) indicates that retail traders are currently net SHORT on USD/CAD, with 59% holding short positions.

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