USD/CAD: In anticipation of new input data – Analytics & Forecasts – 15 August 2023

Investors are waiting for the publication today (at 12:30 GMT) of new US macro data, this time on export/import prices and retail sales. It is the main leading indicator of consumer spending, which accounts for most of the total economic activity of the population, while domestic trade accounts for the largest part of GDP growth.

A relative decline in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive impact on the USD.

At the same time (at 12:30 GMT) Statistics Canada will release the July inflation report.

If the expected data turns out to be worse than the previous values, then this will negatively affect the CAD. The data is better than the forecast and the previous values should have a positive impact on the CAD.

Data on GDP, labor market and inflation rate are decisive for the Bank of Canada (as for the Fed), when planning the parameters of monetary policy.

At the end of the July meeting, Bank of Canada leaders raised the key rate to 5.0%, saying in an accompanying statement that the Canadian economy was stronger than expected, and demand began to grow. At the same time, they noted that “the board of governors remains concerned that progress towards reaching the inflation target may slow down, jeopardizing a return to price stability,” and “underlying price pressures appear to be more resilient than expected.”

A further slowdown in inflation towards the target range of the Bank of Canada 1%-3% may provoke a weakening of the CAD.

From a technical point of view, USD/CAD is developing an upward trend, moving in the bull market zone, above the key support levels of 1.3380, 1.3365, 1.3155, 1.3095.

At the time of writing this article, the USD/CAD pair is trading near 1.3485, in close proximity to the local resistance level of 1.3500, corresponding to the 10-week high reached last week.

We are waiting for a breakout of this level and further growth.

Support levels: 1.3450, 1.3403, 1.3380, 1.3365, 1.3330, 1.3318, 1.3300, 1.3200, 1.3155, 1.3100, 1.3095

Resistance levels: 1.3500, 1.3530, 1.3600, 1.3665, 1.3700, 1.3810, 1.3860, 1.3900, 1.3970, 1.4000

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