USD/CAD Price Analysis: Extends its upside on unexpectedly robust preliminary US PMI growth
|- USD/CAD bounces back strongly after upbeat US preliminary S&P Global PMI report for June.
- Canadian Retail Sales grew expectedly by 0.7%.
- The Fed is expected to deliver two rate cuts this year.
The USD/CAD pair recovers strongly from 11-day low near 1.3670 in Friday’s American session. The Loonie asset bounces back as the US Dollar (USD) extends its upside after the US S&P Global PMI data for June shows that the Composite PMI surprisingly outperformed expectations that were pointing to slowdown in activity.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to six-week high near 105.90.
However, investors are still uncertain about the US Dollar’s outlook as investors expect that the Federal Reserve (Fed) will start reducing interest rates from the September meeting. Market participants expect that the Fed will cut interest rates twice this year. On the contrary, Fed policymakers continue to argue in favor of reducing interest rates only once this year.
Meanwhile, the Canadian Dollar barely moved as Canada’s Retail Sales for April grew in line with expectations of 0.7% month-on-month. The Retail Sales data comes out positive after contracting for straight three months.
USD/CAD trades in a Symmetrical Triangle chart pattern, which indicates a sharp volatility contraction. Spot prices remain sticky to the 20-day Exponential Moving Average (EMA) near 1.3700, indicating a sideways trend.
The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting indecisiveness among market participants.
Fresh buying opportunity would emerge if the asset breaks above April 17 high at 1.3838. This would drive the asset towards 1 November 2023 high at 1.3900, followed by the psychological resistance of 1.4000.
In an alternate scenario, a breakdown below June 7 low at 1.3663 will expose the asset to May 3 low around 1.3600 and April 9 low around 1.3547.
USD/CAD daily chart
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