USDCAD rises as Canadian inflation declines and US manufacturing outlook improves

USDCAD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	0.61%	85 Pips
Week to-date	0.69%	96 Pips
April	-2.94%	-422.7 Pips

Upcoming key events (London Time)

Wed 01:30 PM USD Monthly Retail Trade (1-mth)
Wed 02:45 PM CAD Bank of Canada Policy Interest Rate

What happened lately

In Canada, recent economic data indicates a deceleration in inflation rates. As of March, the Bank of Canada’s Core Inflation CPI over a 12-month period has decreased to 2.2% from 2.7% in February. The monthly CPI inflation rate also saw a significant decline from 1.1% in February to 0.3% in March. Moreover, the BoC CPI Core Inflation Rate for March registered at 0.1%, down from 0.7% in February. The overall CPI inflation rate decreased to 2.3% in March as opposed to 2.6% the previous month. This trend of decreased inflation rates may imply a potential easing of inflationary pressures in the Canadian economy, which can influence the Bank of Canada’s future interest rate decisions.

In the United States, the New York Empire State Manufacturing Index has shown signs of improvement. In April, the index rose to -8.1 points, a notable increase from the -20 points recorded in March. This improvement signals a positive shift in the manufacturing sector’s outlook, which could suggest an overall strengthening of US economic conditions. Such advancements might lead to increased business activities and output in the coming months.

The changes in inflation rates in Canada and the improvement in the manufacturing index in the US could potentially impact the USDCAD currency pair. With Canadian inflation pressures easing and the US manufacturing sector showing signs of recovery, market participants might perceive the economic conditions in the US as more robust compared to Canada. This perception could lead to a strengthening of the US dollar against the Canadian dollar, as seen with the USDCAD rising by 0.61% to 1.39590. Upcoming high-impact events, such as the US Monthly Retail Trade data and the Bank of Canada’s policy interest rate decision, could further influence USDCAD movements, depending on their outcomes and the subsequent market reaction.

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What can we expect from USDCAD today?

USDCAD on Tuesday rose 0.61% to 1.39590. Price is below 9-Day EMA while Stochastic is rising in oversold zone.

Updated daily direction for USDCAD looks bullish as the pair ended higher after Tuesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.40091 with break above could target R2 at 1.40593 or figure level area. While towards the downside, we are looking at daily low of 1.38460 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.39777 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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