Canadian Dollar stands firm near three-month high vs weak USD ahead of data

USD/CAD attracts sellers for the third straight day amid a combination of negative factors.
Bullish oil prices underpin the Loonie, while receding Fed rate hike bets weigh on the USD.
Traders now look to Canadian Retail Sales data and the flash US PMIs for a fresh impetus.

Haresh Menghani FXStreet

The USD/CAD pair remains under some selling pressure for the third consecutive day and trades near a three-month low, just above mid-1.3700s during the first half of the European session on Friday. Spot prices remain on track to register heavy losses for the fourth week in a row – also the sixth in the previous seven – and seem vulnerable amid a combination of negative factors.

Crude oil prices hold steady near a three-week high as traders continue to price in the geopolitical risk premium amid the US-Iran standoff over the Strait of Hormuz. Adding to this, Yemen’s Iran-backed Houthi militant group claimed to have targeted eight oil tankers since declaring a maritime blockade on Saudi shipping in late July, raising the risk of a broader regional conflict and further supporting the black liquid. This, in turn, is seen as underpinning the commodity-linked Loonie, which, along with a broadly weaker US Dollar (USD), continues to exert downward pressure on the USD/CAD pair.

The US inflation data released last week pointed to signs of easing price pressures, undermining prospects for an immediate rate hike by the US Federal Reserve (Fed). In fact, traders are currently pricing in a greater chance that the US central bank will keep rates steady at its September policy meeting. This, in turn, keeps the USD Index (DXY), which tracks the Greenback against a basket of currencies, depressed near its lowest level since May 14, set on Thursday. However, inflation risks stemming from higher oil prices keep Fed rate hike bets on the table and help limit further losses for the USD.

Moreover, Minutes of the July 28-29 FOMC meeting, released on Wednesday, revealed that Fed officials indicated the need to raise interest rates soon unless there was more progress on bringing down inflation. This might hold back USD bears from placing fresh bets and lend some support to the USD/CAD pair. Traders now look forward to the release of monthly Canadian Retail Sales data and the flash US PMIs for some impetus heading into the weekend. Apart from this, the incoming geopolitical headlines might continue to infuse some volatility and produce short-term opportunities.

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by Statistics Canada on a monthly basis, measures the total value of goods sold by retailers in Canada based on a sampling of retail stores of different types and sizes. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales values in the reference month with the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

GBP/USD clings to gains near 1.3650 after mixed UK data

GBP/USD trades in positive territory at around 1.3650 in the European session on Friday as the upbeat PMI data supports Pound Sterling despite disappointing Retail Sales figures. Meanwhile, the US Dollar (USD) struggles to stay resilient against its peers following the Treasury Department's decision to boost long-term bond purchases earlier in the week, helping the pair hold its ground ahead of US PMI data.

EUR/USD holds near 1.1700 ahead of US PMI data

EUR/USD consolidates its weekly gains at around 1.1700 in the European session on Friday following the mixed PMI prints from Germany and the Eurozone. Investors await preliminary August PMI surveys for the US, while the persistent USD weakness allows the pair to keep its footing.

Gold hits fresh high since June above $4,550 as receding Fed hike bets undermine USD

Gold sticks to modest gains near its highest level since early June, touched earlier this Friday, and trades just above $4,550 heading into the European session. The commodity is looking to build on the breakout momentum above a technically significant 200-day Simple Moving Average amid a weaker US Dollar. Traders scaled back their bets on an immediate interest rate hike by the Fed after the latest US inflation data released last week signaled signs of cooling price pressures.

Bulls in control with Bitcoin heading toward $80,000, Ethereum $2,500, XRP $1.50

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) are extending their rallies as bullish momentum strengthens and continue to cheer the US Treasury’s decision to double its debt buyback operations. BTC has climbed nearly 20%, ETH over 25% and XRP nearly 30% so far this week.

The Japanese Yen’s historic rescue is running out of steam

The Japanese Yen staged a spectacular 900-pip comeback after a historic US-Japan intervention. Less than three weeks later, that rescue is already showing signs of fading. The Yen is benefiting somewhat from a softer US Dollar, but its downward trend is likely to resume as the underlying pressure on the currency has not disappeared.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.