**Canadian Dollar Weakens Further, Struggles to Maintain Bullish Momentum**
*Original reporting by David Iusow for FXStreet; expanded and rewritten by AI with added context and market insights.*
The Canadian dollar (CAD) faced renewed downward pressure heading into the close of the week, struggling to preserve the bullish momentum it briefly achieved earlier. Despite some stable economic data out of Canada and a relatively hawkish stance from the Bank of Canada (BoC), the loonie is being outpaced by a resurgent US dollar (USD). External factors such as global risk sentiment, falling crude oil prices, and evolving expectations around US interest rates are also contributing to the Canadian currency’s decline.
This article explores the current conditions affecting the Canadian dollar, key technical trends, and broader macroeconomic forces influencing the currency markets.
## Canadian Dollar Weakens on Friday, Fails to Sustain Rebound
The CAD saw another setback on Friday, giving up more of the gains it had momentarily recaptured earlier in the week. After attempting a modest rebound against the US dollar, the loonie fell back, with USD/CAD temporarily climbing back above the 1.37 level.
### Key Factors Behind the CAD’s Slide
Several significant forces are weighing against the Canadian dollar:
– **Strength of the US dollar:** The US dollar index (DXY), which measures USD performance against a basket of major currencies, has rebounded amid renewed optimism over the US economy. Investors are growing skeptical about imminent Fed rate cuts due to resilient US inflation and strong labor market data.
– **Falling crude oil prices:** Canada is one of the world’s top oil exporters, and the Canadian dollar often moves in correlation with oil prices. West Texas Intermediate (WTI) crude oil dropped below $79 per barrel on Friday, contributing to the loonie’s weakness.
– **Market risk aversion:** A return to risk-off sentiment due to ongoing geopolitical tensions and global economic uncertainty has increased demand for safe-haven assets like the US dollar, while commodity-linked currencies like the CAD suffer.
– **Mixed Canadian economic data:** Although some Canadian indicators suggest economic resilience, concerns remain about consumer spending, inflation control, and tight monetary policy stifling growth.
## USD/CAD Price Consolidates with Bullish Bias
USD/CAD has seen a bullish tilt during most of the past week, with the pair finding steady bids above 1.3650. The weakness in CAD allowed the greenback to push higher, supported by strong US economic reports.
### USD/CAD Performance Indicators
– **Resistance levels:** The USD/CAD pair is approaching notable resistance near 1.3740. A firm break above this level could open the door to further gains, possibly toward 1.3800 and beyond.
– **Support levels:** Immediate support is seen near 1.3670, with stronger support around 1.3600. A break below these levels would indicate a reversal back toward the weekly lows.
– **Technical indicators:** Momentum indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to support a bullish outlook in the short term, albeit with signs of overextension.
## Canadian Economic Snapshot
Canada’s economy has shown signs of slowing growth, mixed labor market metrics, and tempered consumer confidence. This is partly due to higher interest rates undermining both retail consumption and business investment.
### Latest Canadian Economic Reports
– **GDP growth:** Canada’s GDP grew modestly in Q1 2024, expanding 1.7% annually, slightly above expectations. Nevertheless, this remains modest relative to historical averages.
– **Employment:** The unemployment rate remained steady around 6.2% in April 2024, reflecting both weak hiring and a softening labor market.
– **Inflation pressures:** Canada’s inflation has cooled slightly but remains above the BoC’s 2% target. The latest Consumer Price Index (CPI) report showed an annual pace of
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