- The USD/CAD is negotiated about 1,3575 while the markets digest a retail sales of US USA before the Fed fees decision on Wednesday.
- High oil prices and geopolitical risks in the Eastern Middle Limit losses for the Canadian dollar.
- The USD/CAD remains in a descending wedge, while the relative force index indicates a pause in the bearish impulse.
The Canadian dollar (CAD) maintains its position against the US dollar (USD) on Tuesday, with the USD/CAD moving laterally about 1,3575.
The mixed signals of the latest US retail sales data and the growing tensions in the Middle East on Tuesday continue to keep the cautious operators as the Federal Reserve Monetary Policy meeting (FED) approaches.
The pair is struggling to find a direction after falling to a minimum of eight months on Monday, with the markets changing its approach to the next decision of the Federal Open Market Committee (FOMC) and any new holder that arises from the Persian Gulf.
Although oil prices remain high, supporting the CAD through their link with raw materials, recent US data and monetary policy signs remain the center of attention.
Retail sales provide mixed signals on consumer spending trends
The publication of US retail sales on Tuesday has provided a mixed image. The main figures fell 0.9% in May, below the market expectations of a 0.7% drop and marking the most pronounced fall since the beginning of 2024. Sales excluding cars also fell 0.3%, pointing to a generalized weakness in consumer activity.
However, the control group, which excludes volatile categories and is incorporated directly to the calculation of the Gross Domestic Product (GDP), increased 0.4%, indicating a strong rebound from -0.1% of April and a sign that basic consumption remains resistant.
For the Federal Reserve, the report presents a mixed image. A fall in the main number reinforces the case to keep the stable rates and possibly reduce them later in the year. However, the firm control group suggests that the economy remains resistant, reducing the urgency of feat cuts.
From a broader perspective, the conflict between Israel and Iran is intensifying, threatening the security of the Ormuz Strait, a critical point for the global oil supply.
Since the CAD is a currency linked to raw materials, high oil prices can help limit the fall of the loonie.
In the short term, the operators will closely monitor the fluctuations of oil prices related to developments in the Middle East and analyze the Fed signals on Wednesday. These intersective forces will probably shape the USD/CAD path in the second half of the week.
Technical levels of the USD/Cad
The USD/CAD remains under a sustained sales pressure, negotiating about 1,3580 and keeping just above the key support of the trend line.
Prices have continued to respect the limits of a descending channel, with the simple mobile socks (SMA) of 10 days (1,3644), 20 days (1,3713) and 50 days (1,3819) located above the current level.
The torque briefly tested the lower limit of the channel about 1,3540, but has not yet decisively broken below it.
A closure below this level could open the door towards the minimum of November 2024 of 1,3419. Meanwhile, the relative force index (RSI) stands at 29 and points up, indicating that the bullish impulse could be losing strength.
If the US dollar is strengthened, this could risk a short -term consolidation or a technical rebound towards resistance in 1,3640–1,3710 in the short term.
USD/CAD DIARY GRAPH
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
