Usdcad drops as mixed US economic signals create volatility

USDCAD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.69%	-99.3 Pips
Week to-date	-0.98%	-140.1 Pips
February	-2.08%	-301.3 Pips

Upcoming key events (London Time)

Fri 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In the United States, the latest economic data shows mixed signals about the country’s economic condition. In the labor market, initial unemployment claims decreased to 213,000 from 220,000, indicating a positive trend and a robust job market. However, inflation metrics display upward momentum: the Producer Price Index (PPI) for January rose to 0.4% from 0.2% the previous month, revealing pressures in the production phase of the economy. Over a 12-month period, the PPI climbed slightly to 3.5% from 3.3%, while the PPI excluding food and energy also inched up to 3.6%. Simultaneously, consumer inflation has been marked by a rise in the CPI to 3% from 2.9% in December, with the CPI for January increasing to 0.5%. The Core CPI, excluding food and energy, showed an increase of 0.4%. Budgetary constraints are represented by the U.S. Treasury Budget, which fell significantly from a $87 billion deficit in December to $129 billion in January, highlighting fiscal challenges. The cumulative data portrays an economy grappling with inflationary forces yet steady employment figures.

For the USDCAD exchange rate, this series of economic data from the U.S. can have significant implications. The drop in unemployment claims signifies a promising labor market, which can strengthen the U.S. dollar due to increased economic confidence and consumer spending potential. However, the upward trend in inflation indicators, including both the PPI and CPI, points to increasing costs, which may prompt the Federal Reserve to consider interest rate hikes to temper inflation. If the Fed decides on a tighter monetary policy, it could bolster U.S. dollar strength. In contrast, the worsened Treasury Budget situation might offset some dollar strength due to concerns over fiscal stability. Overall, the mixed data could result in volatility for the USDCAD exchange rate, with factors pulling in opposing directions. The upcoming of Retail Trade data might bring further clarity or introduce new dynamics to the currency pair’s movement. The observed recent decline of USDCAD by 0.69% indicates immediate market reactions to these complexities, possibly reflecting investor anticipation of forthcoming economic measures or existing market sentiment.

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What can we expect from USDCAD today?

USDCAD on Thursday dropped -0.69% to 1.41917. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCAD looks bearish as the pair posted lower in Thursday trading session.

Looking ahead for the day, immediate support level is at S1 1.41459 with break below could see further selling pressure towards S2 at 1.41001. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.43037 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.41790 would indicate selling pressure.

For the week to-date, take note that USDCAD is bearish as the pair posted lower by -0.98%.

Key levels to watch out:

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