- USD/CAD rebounds from the six-week low set on Friday amid the surge in fresh dollar buying.
- US PCE report reignites Fed rate hike bets and continues to support USD rebound.
- A rebound in oil prices and a slight improvement in Canadian GDP could support the loonie and cap gains.
The pair USD/CAD shows some resistance below 1.2800 and staged a nice rebound from the 6-week low hit this Friday. Intraday buying continues after the release of US and Canadian macroeconomic data and pushes the pair to a fresh daily high around 1.2850 during the early American session.
As investors digest the less aggressive FOMC decision and the disappointing US GDP data on Thursday, the US dollar turns around on the last day of the week and offers some support to the USD/CAD pair. The recovery of the dollar from its lowest level since July 5 accelerates after the publication of a report on personal consumption expenditure (PCE) in the US stronger than expected.
The US Bureau of Economic Analysis reported that the headline index accelerated to 6.8% y/y in June from 6.3% previously. The core PCE price index – the Fed’s preferred gauge of inflation – rose to 4.8% yoy, versus 4.7% in May that was expected. Other data showed that personal spending and personal income increased by 1.1% and 0.6%, respectively.
The upbeat data could revive bets on a Fed rate hike of 50 basis points at each meeting for the remainder of the year. This, coupled with signs of a cautious opening in US equity markets, appears to benefit the safe haven dollar and push USD/CAD higher. That said, a rebound in crude oil prices could support the commodity-linked loonie and cap gains.
The Canadian dollar, meanwhile, reacts little to domestic data, which showed economic growth remained flat in May. The release of this data goes unnoticed, suggesting that the dollar’s price dynamics could continue to influence the USD/CAD pair.
Technical levels
Source: Fx Street
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