The USD/CAD experienced fluctuations around the 1.3200 level following the release of economic data from both the US and Canada, but eventually staged a rebound, nearing the critical resistance at 1.3250. Despite hitting weekly highs at 1.3248, the pair failed to breach higher, leading to a sideways movement and is likely to close the week without significant changes.
Data Impacting Sideways Movement
Economic data released on Friday revealed that the Canadian GDP expanded by 0.3% in May, aligning with market expectations. The Loonie initially rose in response, but later retraced its gains, leading to the USD/CAD moving sideways.
Analysts at the National Bank of Canada pointed out that several temporary factors distorted the May GDP data, with the end of the federal employees’ strike boosting the economy while forest fires caused a contraction in the energy sector.
Excluding these factors, the Canadian economy actually grew by 0.4%, surpassing the headline figure of 0.3%. However, the analysts cautioned that this rebound might not be sustainable.
In regards to US data, the annual Core Personal Consumption Expenditure Index dropped from 4.6% to 4.1% in June, exerting downward pressure on the US Dollar.
Additionally, Personal Income increased by 0.3%, falling short of the market consensus of 0.5%, while Personal Spending rose by 0.5%, exceeding the expected 0.4%. Furthermore, the Employment Cost Index during the second quarter rose by 1%, slightly lower than the market forecast of 1.1%.
USD Pullback on Soft Inflation Data
Following the release of data indicating softer inflation, the US Dollar retreated, causing the US Dollar Index to decline by 0.20% on Friday and partially erasing Thursday’s gains. Despite this pullback, the DXY is still on track for a second consecutive weekly gain. Looking ahead, both the US and Canada will release employment reports next week, potentially influencing the USD/CAD further.
USD/CAD Approaching 1.3250 Level
The USD/CAD maintains a slight bullish bias but continues to face resistance near the 1.3250 area. Should it break above this level, an acceleration could follow, with the next resistance point expected at 1.3290. On the other hand, the critical support level is situated at 1.3150, preceded by an interim support at 1.3190.
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