**USD/CAD Holds Steady Near 1.3600 as Traders Look Ahead to Key US PMI and Canadian Retail Sales Data**
*Adapted and expanded from an article by Christian Borjon Valencia via FXStreet*
The USD/CAD currency pair has been trading in a narrow range, hovering close to the 1.3600 level as of recent sessions. Despite recent volatility in global markets, the pair has shown limited movement, largely due to a cautious market sentiment ahead of crucial economic data releases from both the United States and Canada. Traders are keeping a close eye on the upcoming U.S. Purchasing Managers’ Index (PMI) and Canadian retail sales data, both of which have the potential to drive short-term movements in the USD/CAD exchange rate.
This in-depth article offers a comprehensive breakdown of the current situation in the USD/CAD market, outlining key economic indicators, central bank expectations, and global risk sentiment drivers. With a neutral short-term outlook and closely aligned monetary policies between the Federal Reserve and the Bank of Canada (BoC), the currency pair remains range-bound but poised for potential breakout moves depending on incoming data.
## Current Price Action: Stability Around 1.3600
The USD/CAD exchange rate is exhibiting subdued price movement around the 1.3600 level, reflecting cautious investor sentiment. Despite fluctuations in oil prices and a modest recovery in the US Dollar Index (DXY), the pair continues to trade sideways.
– As of the latest session, USD/CAD is hovering just below the psychological barrier of 1.3600.
– Market players are exercising restraint in anticipation of high-impact economic data releases from both sides of the border.
– Traders are awaiting confirmation before positioning strongly toward either bullish or bearish bets.
## Technical Overview
From a technical standpoint, the USD/CAD pair remains within a consolidative pattern, indicating market indecision or balance between bulls and bears.
– On the daily chart, the price is holding near the 50-day moving average, which is acting as a short-term resistance.
– Relative Strength Index (RSI) remains neutral, hovering around the 50 level, indicating neither overbought nor oversold conditions.
– Key resistance levels include 1.3645 and 1.3700, while support can be found at 1.3520 followed by 1.3450.
## U.S. Economic Outlook and the Federal Reserve
The future direction of the USD largely hinges on economic indicators like PMI and inflation, both of which influence expectations about Federal Reserve (Fed) interest rate decisions.
– The S&P Global Flash PMIs for July are set to be released soon and will provide insights into the health of the manufacturing and services sectors.
– Consensus forecasts suggest a modest expansion in the services sector but persistent weakness in manufacturing, which could influence USD sentiment.
– Inflation data remains central. Recent Consumer Price Index (CPI) reports indicate a cooling trend, raising speculation that the Fed may pause or even cut rates later in the year.
Market expectations for a rate cut have been shaped by dovish commentary by Fed officials and softening inflation figures. According to the CME FedWatch Tool:
– Chances of a 25-basis-point rate cut in the September meeting are over 65 percent.
– Markets are pricing in at least one full rate cut before the end of 2024.
If incoming data, including PMI and jobless claims, support a slowing economic scenario, this could put additional downward pressure on the US Dollar in the near term.
## Canadian Economic Indicators and Bank of Canada Stance
On the Canadian side, attention is focused on the upcoming release of May’s Retail Sales data, which will be critical in shaping expectations for future Bank of Canada policy decisions.
– The Canadian economy continues to show mixed signals. While inflation has eased, household spending and housing remain relatively stable.
– Retail sales are forecast to rise modestly by 0.5 percent in May after a flat reading in April.
Read more on USD/CAD trading.