Article Rewrite: USD/CAD Falls Below 10-Week High but Holds Weekly Advance
Source: Original article by TradingPedia
The US dollar to Canadian dollar (USD/CAD) currency pair recently eased off a 10-week high, as the Canadian dollar found some support from rising oil prices and steady local economic data. Despite the slight pullback from recent peaks, the pair still managed to register a weekly gain, reflecting broader optimism over the US economy and expectations surrounding the Federal Reserve’s future policy moves.
This article will offer a comprehensive overview of the recent movements in the USD/CAD pair, the macroeconomic factors that are influencing this currency pair, and potential future trends that could affect its trajectory in the coming weeks. We’ll also explore historical context, technical levels, and economic indicators relevant to traders and investors following the pair.
Overview: USD/CAD Weekly Performance
– USD/CAD ended the week below its recent 10-week high, retracing some gains.
– The pair reached a peak of 1.3792 earlier in the week before settling lower near the 1.3720 level.
– Canada’s stronger-than-expected GDP data and higher crude oil prices lent support to the loonie (CAD).
– Nonetheless, the pair still marked a weekly gain of around 0.4 percent, reflecting underlying strength in the US dollar driven by hawkish comments from Federal Reserve officials.
Factors Behind the USD/CAD Movement
Several macroeconomic and geopolitical factors contributed to the weekly gains posted by USD/CAD, as well as the modest pullback seen before the weekend:
1. Federal Reserve’s Policy Stance
– The US dollar has been buoyed by resilient economic indicators such as robust labor market figures and higher-than-expected inflation readings.
– Federal Reserve officials have continued to suggest the possibility of maintaining higher interest rates for longer. These hawkish signals keep the dollar elevated against most major counterparts.
– Markets currently expect fewer rate cuts in 2025 than previously forecast. This shift supports USD demand, making it more attractive to yield-seeking investors.
2. Bank of Canada’s Position
– On the Canadian side, the Bank of Canada (BoC) has adopted a cautious tone, leaving room for further rate adjustments depending on upcoming data.
– While the BoC started its rate-cut cycle earlier than the Fed, recent data has made policymakers more circumspect.
– Canada’s inflation moderated slightly in recent months, prompting speculation that the BoC may slow its pace of easing or consider a pause.
3. Crude Oil Prices and the Canadian Dollar
– Canada is one of the largest crude oil exporters in the world. Thus, the performance of oil prices directly impacts the Canadian dollar.
– Brent crude climbed above $84 a barrel during the week, boosted by geopolitical tensions in the Middle East and lower-than-expected US inventories.
– Rising oil prices boosted demand for the loonie as higher energy revenues support Canada’s trade balance and economic outlook.
Key Economic Data Released This Week
Several important data releases influenced the movement in USD/CAD over the past week:
– US GDP (Q2 preliminary): Showed expansion of 1.8 percent annually, slightly missing expectations but remaining strong overall.
– US PCE Prices Index (June): Rose 0.2 percent month-over-month, in line with projections, sparking limited Fed reactions.
– Canadian GDP (May): Surprised markets with a 0.3 percent increase, beating estimates of 0.1 percent and indicating stronger economic momentum.
– US Initial Jobless Claims: Came in below forecasts, highlighting continued resilience in the US labor market.
– Canadian Trade Balance: Narrowed in June but remained in surplus, driven largely by energy exports.
Technical Analysis: Key Levels to Watch
USD/CAD continues to show a strong underlying uptrend, though some short-term overbought signals have emerged. Here are the main technical levels being monitored by traders:
Support Levels
– 1.3660:
Read more on USD/CAD trading.