• USD/CAD capped by 200-week moving average with eyes on a test of 1.3000.
  • Central banks divergence remains a key driving force behind USD/CAD's downside.

This was the week: 

All eyes were on Canadian CPI which declined in June due to a collapse in gasoline prices. Canada retail sales were soft again in May. However, the major highlights came with Federal reserve speakers surprising markets with uber dovish rhetoric which increased the likelihood of a 50 basis point (bp) rate cut at the end of this month's meeting. 

With respect to the price of USD/CAD, the Loonie is supported on the basis that central banks are easing or at least coming with increasingly more dovish rhetoric, but in contrast, the BoC has maintained a neutral policy stance. However, a possible re-escalation in trade tensions between the U.S. and China is a potential spanner in the works for the bulls as such events tend to dampen appetite for risk-sensitive currencies such as CAD. On the other hand, should the trade tensions abate, the recent downward pressure on the currency pair will likely resume and such upward positioning in the CAD will likely see a retest below the 1.30 handle en-route to the 1.28 handle.

Key CAD events:

Canadian CPI declined in June due to a collapse in gasoline price that dropped a huge 8.0%, the sharpest pullback on record for that month. Canada’s consumer price index was down 0.2% in June, taking the year-on-year inflation rate down to 2.0% (from 2.4%), in line with consensus expectations. Then, Retail Sales were a disappointment, declining 0.1% in May.  However, the details of the report didn't t look quite as soft as the headline as most of the decline was attributed to an unusually large 2.0% drop in food & beverage store sales that could well be reversed at some stage.

There are no scheduled key economic events for the week ahead.

Key U.S. events:

Just as markets were set on a 25bp cut from the Federal Reserve, in their speeches this week, both the NY Fed President John Williams and Fed Vice Chairman Richard Clarida hinted at the need for an aggressive rate cut which sent the greenback in a tailspin and yields off a cliff. Williams even specifically said that “it pays to act quickly to lower rates at the first sign of economic distress”. However, strangely, later that day, that particular comment was clarified by a NY Fed spokeswoman to have been in “the context of an academic speech only. We are now in a blackout period before the Federal Open Market Committee's July meeting.

Next week will have a number of key economic events, including U.S. Gross Domestic Product, Durable Goods Orders and a slew of Corporate Earnings from Wall Street. 

"We expect GDP to advance a near-trend 2.0% q/q saar in Q2, down from a strong 3.1% print in Q1. Unlike the prior quarter, we expect consumer spending to be a key engine of growth, rebounding to about 4% after a wobbly start to the year. Business investment, however, continued to slow due to heightened uncertainty while inventories and net exports were likely a drag on growth," analysts at TD Securities explained.

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Jul 18
13:30
 
 
14:30
62B
65B
81B
15:30
2.090%
 
2.135%
18:15
 
 
Friday, Jul 19
14:00
98.4
98.5
98.2
15:05
 
 
17:00
779
 
784
19:30
423.8K
 
390.1K
19:30
$245.5K
 
$244.8K
19:30
$38.4K
 
$17.2K
20:30
 
 
Monday, Jul 22
12:30
 
 
-0.05
15:30
 
 
2.115%
15:30
 
 
2.01%
Tuesday, Jul 23
12:55
 
 
4.7%
12:55
 
 
1%
13:00
 
0.3%
0.4%
14:00
 
5.35M
5.34M
14:00
 
1.2%
2.5%
14:00
 
5
3
17:00
 
 
1.695%
20:30
 
 
-1.401M
Wednesday, Jul 24
11:00
 
 
-1.1%
13:45
 
50.4
50.6
13:45
 
51.0
51.5
13:45
 
 
51.5
14:00
 
 
-7.8%
14:00
 
0.650M
0.626M
14:30
 
 
-3.116M
17:00
 
 
1.791%
Thursday, Jul 25
12:30
 
 
216K
12:30
 
 
1.686M
12:30
 
 
218.75K
12:30
 
 
0.4%
12:30
 
 
$-75.05B Revised from $-74.55B
12:30
 
0.5%
-1.3%
12:30
 
 
-0.5% Revised from -0.6%
12:30
 
0.1%
0.4% Revised from 0.3%
12:30
 
0.1%
0.5% Revised from 0.4%
14:30
 
 
62B
15:00
 
 
-3
15:30
 
 
2.09%
17:00
 
 
1.889%
Friday, Jul 26
12:30
 
1.3%
0.6%
12:30
 
1.9%
3.1%
12:30
 
0.6%
0.5%
12:30
 
1.2%
1.2%
17:00
 
 
779
19:30
 
 
$38.4K
19:30
 
 
423.8K
19:30
 
 
$245.5K

USD/CAD Technical Analysis

The price broke away from below the 38.2% Fibo of the Sep 2017 to date range down at 1.3045. 1.3015 is a fresh low for 2019, just 3 pips below last week's low. 'Funds', (USD/CAD), has been capped by the 200-week moving average while weekly stochastics remain in oversold territory. Prospects to the upside are limited by channel resistance while downside continuation opens 1.2970.

USD/CAD Forecast Poll

The FXStreet forex poll of experts is a sentiment tool that highlights near- and medium-term price expectations from leading market experts and shows a bearish bias near term turning bullish over time.

1 Week
Avg Forecast 1.3022
100.0%88.0%13.0%0102030405060708090100
  • 13% Bullish
  • 75% Bearish
  • 12% Sideways
Bias Bearish
1 Month
Avg Forecast 1.3124
100.0%82.0%50.0%04550556065707580859095100105
  • 50% Bullish
  • 32% Bearish
  • 18% Sideways
Bias Bullish
1 Quarter
Avg Forecast 1.3185
100.0%90.0%61.0%06065707580859095100
  • 61% Bullish
  • 29% Bearish
  • 10% Sideways
Bias Bullish

 

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