- Inflation in the United States continues to fall, as the ECI showed, sparking talks about a Fed pivot.
- Canada’s economy stalled and grew at a 0.1% pace in December.
- USD/CAD Price Analysis: It would likely extend its downtrend and test the 200-day EMA.
The USD/CAD retreated on Tuesday, as the US Dollar (USD), extended its losses following a report by the US Department of Labor (DoL), which showed that employment costs cooled down. At the same time, Canada’s economy grew as expected. Therefore, the USD/CAD is trading at 1.3319 after hitting a daily high of 1.3471.
US data weighed on the USD and boosted the CAD
The US Dollar continued its downtrend, weighed by the US Employment Cost Index (ECI), which measures workers’ compensation, decelerated after printing 1.2%, resting at 1%, below estimates of 1.1%. After the data was released, the greenback slashed some of its earlier gains against most G8 currencies, particularly the Loonie (CAD). Speculations arise that the US Federal Reserve (Fed) could pause after February and March’s meetings, as another inflation gauge revealed last week data showed the inflation downtrend extended to four straight months. Meanwhile, financial analysts estimate the US Fed would end lifting rates once they hit the 4.75% to 5% peak.
At the same time, Statistics Canada revealed that the economy in December grew at a 0.1% pace, unchanged compared to November’s data. On an annual basis, the Gross Domestic Product (GDP) likely gained 1.6% in Q4. If the flash estimate proves correct, the economy will expand by 3.8% in 2022 from the previous year, above the central bank’s 3.6% forecast.
Reflecting on the abovementioned, the USD/CAD dropped from around daily highs and extended its losses towards 1.3340, while the US Dollar Index, a gauge for measurement of the buck’s value vs. six peers, slides 0.13%, clings above 102.00 for the second day in a row.
Ahead of the week, the US economic docket will feature the S&P Global and ISM Manufacturing PMIs and the US Federal Reserve’s (Fed) decision. If the Fed sounds dovish, that would likely weaken the USD/CAD pair, which could extend its losses below 1.3300.
USD/CAD Technical Analysis
The USD/CAD, Tuesday’s candle, shows that the trading range has been wide throughout the session. Even though the pair reclaimed the 20 and 50-day Exponential Moving Averages (EMAs), each at 1.3406 and 1.3457, dropped sharply beneath both, and formed a candle with a considerable up-wick, suggesting that sellers are in charge. Therefore, the USD/CAD first support would be the YTD low at 1.3300, followed by the 200-day EMA at 1.3255, before sliding towards the psychological 1.3200 mark. On the other hand, if USD/CAD buyers reclaimed 1.3400, a test of the 100-day EMA is on the cards.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.