USD/CAD remained relatively flat around the 1.3700 level on Friday following the release of key economic data for both Canada and the United States. The pair started the Asian session in the 1.3730s, but as the Canadian Dollar (CAD) gained strength against the USD, USD/CAD declined before a late-stage rally by the USD brought the pair back to even as the trading day progressed.
The release of Canadian GDP data for April at 12:30 GMT showed a 0.3% rise, in line with analysts’ expectations, after a 0.0% rise in March. This positive growth rate was seen as a sign of a strong economy, but it is not expected to deter the Bank of Canada (BoC) from lowering interest rates in July. Lowering interest rates can lead to currency depreciation due to reduced foreign capital inflows, but it may also put a floor under downside for USD/CAD.
US inflation data, particularly the Personal Consumption Expenditures (PCE) Price Index, showed a decline in May, with PCE falling to 2.6% and Core PCE falling to 2.6% on a year-on-year basis. This cooling inflation trend brought further downside to the US Dollar, affecting USD/CAD as well. The declining inflation slightly increased the probability of the Fed making an interest rate cut in September, according to the CME FedWatch Tool.
Technical analysis shows that USD/CAD remains stuck in a range after a failed breakout attempt from a Symmetrical Triangle (ST) price pattern back in June. Despite bearish price action following the breakout, the odds favor a potential move higher if the resistance level at 1.3791 is broken. A move above this level could lead to a target of 1.3850, while a break below 1.3624 could indicate a downside breakout with an initial target at 1.3590.
Overall, the economic data released for Canada and the US had an impact on USD/CAD trading, with the pair remaining flat around the 1.3700 level. Market analysts are closely watching developments in both countries, including potential interest rate cuts by the BoC and the Fed, as well as political events such as the upcoming US presidential election. Traders will continue to monitor technical levels for USD/CAD to identify potential breakout opportunities and trading strategies.
