- The USD/CAD pair is trading sideways again at the 1.2830 area after hitting two-week lows earlier in the session.
- The pair is on track to end the week down around 0.5% amid dollar and Canadian CPI weakness.
The USD/CAD reached its lowest level in over two weeks at the 1.2775 area on Friday, although it was unable to make a sustained break below previous weekly lows at the 1.2780 area or even the 1.2800 level. At current levels near 1.2830, the pair is trading virtually unchanged on the day and is on track to drop around 0.5% on the week, which would mark the biggest weekly drop since March, with the pair now trading around a 2.0% below multi-month highs hit last week above 1.3050.
An improvement in global risk appetite on the last day of the week, after the People’s Bank of China eased financial conditions in the country with a surprise cut in its 5-year benchmark interest rate (called the prime rate loan), helped the pair trade with a negative bias. But the pair has also been weighed down this week by a combination of US dollar weakness and strong Canadian economic data.
As for the former, despite Federal Reserve policymakers being very bullish throughout the week, the dollar appears to be suffering from some profit-taking. Separately, news broke on Wednesday that Canada’s annual consumer price inflation rate had unexpectedly risen to a new multi-decade high of 6.8%, raising expectations that the Bank of Canada continued to tighten its monetary policy and boosted the loonie at that time.
Next week, Canadian Retail Sales data for April due out on Thursday will be closely scrutinized for the health of the Canadian consumer, but the main drivers for the USD/CAD pair will continue to be risk appetite , commodity prices and economic events in the United States. The PMIs for May will be released on Tuesday, the Minutes of the latest Federal Reserve meeting on Wednesday and the second estimate of US Q1 GDP growth on Thursday, followed by the PCE core inflation report from April, Friday.
Technical levels
Source: Fx Street
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