The Canadian Dollar (CAD) has experienced a slight decrease in overnight trading, as pointed out by Scotiabank’s chief FX strategist Shaun Osborne. Despite this, the US Dollar (USD) has seen marginal gains on the day, with spot prices looking to close higher for the week for the first time since early June. The current resistance level above the market is at 1.3750/55.
After testing the recent range base around 1.36 last week, the spot may drift higher in the near term to test the early July high around 1.3750. Canadian Retail Sales are projected to decline by 0.6% in May, in line with the flash estimate released alongside April data last month. Ex-auto sales are also expected to fall by 0.5% in the same month. While weak data is not surprising, it could further solidify market expectations for a rate cut at the upcoming Bank of Canada (BoC) policy decision, although there is a narrow consensus forecasting a “hold.”
Spot gains are currently hovering close to yesterday’s peak in the USD around 1.3720, with potential trend resistance looming. However, an increase through the low 1.37 zone could shift near-term risks towards strengthening the USD. Resistance levels above the market are situated at 1.3750/55 and 1.3790/00, while intraday support is at 1.3680/90. Overall, the market is anticipating potential USD strength in the short run, with the focus on upcoming economic data releases and the BoC policy decision.
Investors and traders will closely follow the movement of the Canadian Dollar in the coming days, particularly in response to the expected decline in Retail Sales and Ex-auto sales for the month of May. The weak data, if confirmed, could increase the likelihood of a rate cut at the upcoming BoC policy decision, leading to potential fluctuations in the CAD/USD exchange rate. Market sentiment is divided, with some expecting a hold in rates, while others are preparing for a cut. These uncertainties could impact the CAD’s performance in the near future.
As the CAD hovers around key resistance levels against the USD, traders will monitor any developments that could influence near-term price movements. A breach of the 1.3750/55 resistance level could pave the way for further USD strength, while a failure to surpass this barrier may result in a temporary pullback. With intraday support at 1.3680/90, traders will assess the market dynamics to gauge potential buying or selling opportunities based on the prevailing trend.
In conclusion, the Canadian Dollar has experienced some weakness in overnight trading, with the US Dollar showing marginal gains. The upcoming Canadian Retail Sales data release could further impact the CAD’s performance, potentially leading to a rate cut by the Bank of Canada. Traders will closely monitor key resistance and support levels to gauge potential USD strength in the short run, while anticipating market reactions to economic data and central bank decisions. The CAD/USD exchange rate remains subject to volatility and market uncertainties, with investors adjusting their positions accordingly.
