- The USD/CAD quotes well within the negotiation range on Tuesday around 1,3650 before the key data of the US labor market.
- Investors have remained on the sidelines while waiting for clarity about the state of bilateral agreements between the US and their commercial partners.
- Commercial conversations between the US and Canada will resume as Canadian officials eliminate the digital services tax.
The USD/CAD pair quotes in a very narrow range about 1,3650 during the Asian negotiation session on Wednesday. The Loonie is consolidated while investors expect the US non -agricultural payroll data (NFP) for June in search of new clues about the monetary policy perspective of the Federal Reserve (Fed).
Before the publication of the US NFP report, investors will pay special attention to ADP employment change data for June, which will be published at 12:15 GMT.
According to the CME Fedwatch tool, the Fed is almost sure of cutting interest rates at the September policy meeting after leaving them unchanged this month.
In addition, the uncertainty around the US bilateral agreements with its commercial partners before the dated dated July 9 and the impact of the tax cuts bill of President Donald Trump has forced investors to stay out.
Meanwhile, it is expected that the unworthy of commercial tensions between the US and Canada strengthens the Canadian dollar (CAD). The Economic Advisor of the White House, Kevin Hassett, expressed confidence on Monday that commercial conversations with Canada will resume, since the Nation has reversed the Digital Services Tax imposed on US technology companies.
The USD/CAD continues to face sales pressure at each attempt over the 20 -day exponential (EMA) mobile average, which suggests a tendency to “sell in rallies.” The 14 -day relative force (RSI) index oscillates about 40.00. A new bearish impulse would appear if the RSI breaks below that level.
Looking ahead, the asset could slide to the psychological level of 1,3500 and the minimum of September 25, 1,3420 if it breaks below the minimum of June 16, 1,3540.
On the contrary, an upward movement above the maximum of May 29, 1,3820 would open the door to the maximum of May 21, 1,3920, followed by the maximum of May 15, 1.4000.
USD/CAD DAILY 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.
