Usdcad records slight increase while economies of the US and Canada show mixed signals

USDCAD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	0.01%	1 Pips
Week to-date	0.42%	60.3 Pips
March	-0.09%	-13 Pips

Upcoming key events (London Time)

Fri 02:00 PM USD Index of Consumer Sentiment

What happened lately

In February, the U.S. faced a mixed economic scenario. The Producer Price Index (PPI), excluding the Food and Energy sectors, fell 0.1% from January’s 0.5%, indicating a slackening in industrial inflation. Over a year, the PPI for these sectors declined to 3.4% from a revised 3.8%. Similarly, the overall PPI remained flat in February, dropping significantly from January’s 0.6% figure. The annual PPI for the Food and Energy sectors also observed a correction to 3.4% from 3.6%. Meanwhile, the U.S. Monthly Treasury Budget Statement showed a considerable deficit of -$307 billion, magnifying from -$129 billion in the previous month. There was some positive news from the labor market as Initial Unemployment Insurance Claims slightly decreased to 220,000, from the prior 221,000.

Inflation also saw movements with the U.S. Consumer Price Index (CPI) showing a deceleration. The monthly CPI for February was reduced to 0.2% from January’s 0.5%, and the annual CPI reduced to 2.8% from 3% over the same period. The CPI excluding Food and Energy decreased marginally to 3.1% from 3.3% year-over-year. Another sign of a cooling inflation environment was the monthly CPI, excluding Food and Energy sectors, which fell to 0.2% from 0.4% month-over-month.

In Canada, the Bank of Canada decided to lower the Policy Interest Rate to 2.75% from the previous 3%. This decision reflects the central bank’s assessment of the macroeconomic environment that may require supportive monetary measures.

The recent developments in the U.S. and Canadian economies are likely to have varied impacts on the USDCAD forex pair. The general easing of price pressures in the United States indicated by the decline in both the PPI and CPI might exert downward pressure on the U.S. dollar. Such movements generally translate to a marginal strengthening of the Canadian dollar against the U.S. dollar. However, Canada’s interest rate cut could counterbalance this, making the Canadian currency relatively less attractive. As the market weighs these opposing factors, the USDCAD could experience ongoing consolidation with any significant movement depending on forthcoming economic indicators such as the U.S. Index of Consumer Sentiment.

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What can we expect from USDCAD today?

USDCAD on Thursday rose 0.01% to 1.43660. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCAD looks mixed as the pair is likely to consolidate above 1.43577 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.43690 or trades above daily pivot 1.43633. Break above could target R1 at 1.43717. While to the downside, we are looking at 1.43577 (S1) and daily low of 1.43550 as support levels. USDCAD need to break on either side to indicate a short-term bias. A break above 1.43690 may suggest continuation after recent positive movement.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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