|

USD/CAD remains on the defensive below mid-1.3400s, bullish potential seems intact

  • USD/CAD trades with a mild negative bias on Friday, albeit lacks follow-through selling.
  • The emergence of some USD selling turns out to be a key factor exerting some pressure.
  • Bets for one more Fed rate hike in 2023 to help limit losses for the Greenback and the pair.

The USD/CAD pair edges lower on the last day of the week and remains on the defensive through the early European session, though lacks follow-through selling. Spot prices currently trade around the 1.3435 region, down less than 0.10% for the day, and seem poised to build on the recent goodish recovery move from the YTD low touched in July.

The US Dollar (USD) struggles to capitalize on the previous day's solid rebound from over a one-week low – touched in reaction to the softer US consumer inflation figures - and turns out to be a key factor acting as a headwind for the USD/CAD pair. The US Bureau of Labor Statistics (BLS) reported on Thursday that the headline CPI rose from 3% to the 3.2% YoY rate in July, less than consensus estimates, while the Core CPI (excluding volatile food and energy prices) edged lower to 4.7% from 4.8% in June. The data ensures that the Federal Reserve (Fed) will not hike its benchmark overnight interest rate at the September 19-20 meeting and prompts some USD selling.

The inflation, however, remains way above the central bank's 2% target, which, along with hawkish remarks by San Francisco Fed President Mary Daly, keeps the door wide open for one more 25 bps lift-of by the end of this year. In fact, Daly said that the inflation data is moving in the right direction, though the core inflation hasn't made much progress. She added that it would be premature to project whether the Fed raises another time, or holds rates steady for a longer period, as there is a lot of information coming in between now and the next meeting. This leads to a further rise in the US Treasury bond yields and should help limit any further losses for the buck.

Apart from this, the worsening economic conditions in China support prospects for the emergence of some dip-buying around the safe-haven Greenback. This, along with subdued Crude Oil prices and growing acceptance that the Bank of Canada (BoC) will pause its interest rate hike campaign, could undermine the commodity-linked Loonie and lend support to the USD/CAD pair. Investors now look to the US economic docket, featuring the release of the Producer Price Index (PPI), along with the Preliminary Michigan Consumer Sentiment and Inflation Expectations, which might influence the USD. Traders will further take cues from Oil price dynamics to grab short-term opportunities.

Technical levels to watch

USD/CAD

Overview
Today last price1.3435
Today Daily Change-0.0014
Today Daily Change %-0.10
Today daily open1.3449
 
Trends
Daily SMA201.3269
Daily SMA501.3268
Daily SMA1001.3391
Daily SMA2001.3451
 
Levels
Previous Daily High1.345
Previous Daily Low1.3373
Previous Weekly High1.3394
Previous Weekly Low1.3151
Previous Monthly High1.3387
Previous Monthly Low1.3093
Daily Fibonacci 38.2%1.3421
Daily Fibonacci 61.8%1.3402
Daily Pivot Point S11.3398
Daily Pivot Point S21.3346
Daily Pivot Point S31.332
Daily Pivot Point R11.3475
Daily Pivot Point R21.3502
Daily Pivot Point R31.3553

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

More from Haresh Menghani
Share:

Editor's Picks

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading 

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.