- US retail sales data showed an unexpected 1.0% increase in July.
- The odds of a 50 bps Fed rate cut in September have been reduced to 25%.
- Canadian wholesale trade fell 0.6% in June.
USD/CAD price analysis is slightly bearish as the Canadian dollar recovers from recent lows. Meanwhile, the dollar remained steady after data in the previous session revealed better-than-expected retail sales figures.
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On Thursday, the dollar rose as US retail sales data showed a 1.0% increase in July. It was a big surprise as analysts had expected a 0.3% increase. At the same time, the market view was that the US economy was slowing rapidly. The sell-off painted a different picture of resilience, leading to lower Fed rate cut expectations. The odds of a 50 bps rate cut in September have been reduced to 25%.
Furthermore, the outlook for a coming recession has changed as investors cheered for a likely soft landing by the Fed. Meanwhile, another report found that jobless claims fell, pointing to a resilient labor market.
Initially, these reports strengthened the US dollar and weakened the Canadian dollar. However, the bullish rallied after markets priced in fresh bets on a rate cut. A strong US economy favors the Canadian currency as Canada exports most of its oil products to the US. This is why strong demand is driving the Canadian economy.
Meanwhile, data from Canada showed a mixed picture. Canadian wholesale trade fell 0.6% in June after falling 1.2% the previous month. Meanwhile, domestic home sales fell 0.7% in July.
USD/CAD Key Events Today
Neither Canada nor the US will release high-impact economic data today. Therefore, the USD/CAD pair could consolidate.
USD/CAD Technical Price Analysis: Bearish enthusiasm is fading near support at 1.3700
On the technical side, the USD/CAD price has stalled near the 1.3700 support level. Although it is below the 30-SMA, the downtrend has weakened. It is significant that the RSI made a bullish divergence, which indicates a weakening of the bearish momentum.
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Price action reversed as USD/CAD neared the 1.3700 level. The pair made small-bodied candles and stayed close to the SMA. The bears were showing exhaustion. Therefore, there is a good chance that the trend will reverse with a break above the SMA. On the other hand, if the bearish momentum reappears, the price will break below 1.3700 to make a new low.
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