- The USD/CADs digest a mixed American retail sales before Wednesday’s fed rate decisions as trades near the USD/CAD 1.3575.
- In the Middle East, oil prices and geopolitical risks suffered damage to Canada’s dollars.
- The USD/CAD lives in a descending nail, while the relative power index indicates a stagnation in the recession speed.
The Canadian Dollar (CAD) is holding its land against the US Dollar (USD) on Tuesday, with the USD/CAD running sideways near 1.3575.
Mixed indications from the latest American retail sales data and tension in the Middle East on Tuesday continued to keep traders alert as the Federal Reserve (Fed) policy meeting.
The pair are struggling to find direction after falling at an eight -month low on Monday, the markets focused on the upcoming Federal Open Market Committee (FOMC) decisions and any new headlines emerging from the Persian Gulf.
While oil prices are high, support CAD through its commodity link, recent American data and monetary policy indications remain in front and center.
Retail sales provides mixed hints on consumer spending trends
The release of American retail sales on Tuesday provided a mixed picture. The headline figures declined by 0.9% in May, the market expectations to mark the decline of 0.7% from the beginning of 2024 and the highest decline.
However, the control group, which excludes the volatile categories and feeds directly into the calculation of the GDP (GDP), increased 0.4%, which indicates a strong rebound from the April -0.1% and a sign that the main consumption remains flexible.
For the Federal Reserve, the report presents a mixed picture. The fall in the headline number is strengthened to keep the rates stable and possibly ease later in the year. However, the firm control group suggests that the economy is still flexible, reduces urgency for rate cuts.
From a broader perspective, the Israel-Iran struggle is intensified, which is a threat to the protection of the hormuz’s drainage-an important chocapoint for the small supply.
Since CAD is a commodity-linked posture, elevated oil prices can help limit the negative side for Loni.
In the near period, traders will closely monitor the ups and downs in the price of oil connected to the Middle East from the Fed to Middle East and Parsh signals on Wednesday. These intersection forces are likely to shape the path of USD/CAD in the latter half of the week.
USD/CAD technical level
The USD/CAD is under constant sale pressure, trading near 1.3580 and is just above the major trendline support.
Prices have continued to respect the boundaries of a descending channel, with 10-day (1.3644), 20-day (1.3713), and 50-day (1.3819) simple moving averages (SMA) are seated above the current level.
The pair briefly tested the lower limit of the channel near 1.3540, but is yet to be decisively broken under it.
A close below this level can open the door towards the low -fly 1.3419 of November 2024. Meanwhile, the relative power index (RSI) hoves over 29 and is pointing more, indicating that the speed of rapid speed may lose steam.
If the US dollar is stronger, it may risk a short -term consolidation or a technical rebellion towards resistance at 1.3640–1.3710 in a near period.
USD/CAD Daily Chart
US Dollar FAQ
The US Dollar (USD) is the official currency of the United States, and a significant number of other countries’ real ‘currency’ currency, where it is found in circulation with local notes. It is the world’s heaviest business currency, according to 2022 data, more than 88% of all global forex turnover, or an average of $ 6.6 trillion per day transaction. After World War II, the USD took over as the world’s reserved currency from the British pound. For most of its history, the US dollar was supported by gold, until the Bretton Woods compromised in 1971 when Gold moved to Standard.
The most important single factor that affects the value of the US dollar is the monetary policy, shaped by the Federal Reserve (Fed). The Fed has two mandates: to promote price stability (control inflation) and complete employment. To achieve these two goals, its primary tool is to adjust interest rates. When prices are rising very quickly and the inflation is above the 2% target of the Fed, the fed rates will increase, which helps in the USD price. When inflation is reduced by 2% or the unemployment rate is very high, the fed interest rate may decrease, which weighs on greenback.
In extreme conditions, the Federal Reserve can also print more dollars and apply quantitative ease (QE). Qi is the process by which the fed greatly increases the flow of credit into a stuck financial system. This is a non-standard policy measure that has dried up the credit because banks will not lend to each other (from fear of opposition default). This is one of the last measures when reducing only interest rates is unlikely to achieve the necessary results. It was Fed’s weapon to combat credit crunchs during the great financial crisis in 2008. It contains more dollars fed printing and use them mainly from financial institutions to buy American government bonds. Qi usually leads to a weak US dollar.
Quantitative Tightening (QT) is a reverse process that stops buying bonds from Federal Reserve Financial Institutions and does not reinstate the principal from bonds that mature in new purchases. This is usually positive for the US dollar.
