- USD/CAD trades nearly 1.3575 because markets digest mixed retail sales in the USA before Wednesday’s Fed Tethot decision.
- Increased oil prices and geopolitical risk in the Middle East limit losses for the Canadian dollar.
- USD/CAD remains in a decreasing system, while the relative force indicator signals the bear pause.
The Canadian dollar (CAD) maintains its ground in relation to the US dollar (USD) on Tuesday, and CAD moves sideways near 1.3575.
Mixed signals from the latest retail data in the USA and escalation voltage in the Middle East on Tuesday still exercise caution of traders as the Federal Reserve (FED) approaches the policy.
The couple try to find a direction after falling to the eight -month lowest level on Monday, and the markets focus on the upcoming decision of the Federal Open Rynek Committee (FOMC) and all recent headers emerging from the Persian Gulf.
While oil prices remain elevated, supporting CAD via their freight connection, the latest data signals and monetary policy in the US remain in the foreground.
Retail sales ensure mixed signals for consumer expenditure trends
The release of retail sales in the US on Tuesday provided a mixed image. The main data dropped by 0.9%in May, there is a lack of market expectations by 0.7%inheritance and marking of the highest decline since the beginning of 2024. Sales, excluding cars, also dropped by 0.3%, indicating the broad softness of consumer activity.
However, the control group, which displaces unstable categories and directly powers the calculation of the gross domestic product (GDP), increased by 0.4%, which indicates a robust reflection since April -0.1%, and the sign that the core consumption remains resistant.
In the case of a federal reserve, the report presents a mixed photo. The decrease in the number of headers strengthens the case of maintaining indefinite rates and probably soothing later this year. However, the company’s control group suggests that the economy is still resistant, reducing the urgency of rate reduction.
From a broader perspective, the Israeli-Iran conflict intensifies, threatening the safety of the Hormuz-Critic Britain Strait for global oil supply.
Since CAD is a currency related to goods, increased oil prices can support reduce minus Loon.
In the near future, traders will closely monitor fluctuations in oil prices related to investments in the Middle East and Fed signal analysis on Wednesday. These intersecting forces will probably shape the USD/CAD path in the second half of the week.
Technical levels of USD/CAD
USD/CAD remains under indefinite sales pressure, trading nearly 1.3580 and maintaining just above the key support of the trend line.
Prices continue to respect the limits of the descendant channel, with 10-day (1,3644), 20-day (1,3713) and 50-day (1,3819) Simple Medium Traffic (SMA) above current level.
The couple briefly tested the lower border of the channel near 1.3540, but they have not yet broken under it.
Closing at this level can open the door towards the lowest level of 1.3419 November 2024. Meanwhile, the relative force indicator (RSI) floats on 29 and is indicated higher, which indicates that the stubborn rush may lose the pair.
If the American dollar strengthens, it may risk low -term consolidation or technical reflection towards resistance of 1.3640–1,3710 in the near future.
Daily USD/CAD chart
FAQ in American dollars
The American dollar (USD) is the official currency of the United States of America and the “de facto” currency of a significant number of other countries where it is in circulation with local notes. It is most often a commercial currency in the world, which is over 88% of all global currency turnover, i.e. an average of $ 6.6 trillion of transactions per day, according to the data from 2022. After the Second World War, USD took over from the British pound as the reserve currency of the world. For most of its history, the American dollar was supported by gold, up to the Bretton Woods agreement in 1971, when the golden standard disappeared.
The most essential single factor affecting the value of the American dollar is the monetary policy, which is shaped by the Federal Reserve (FED). The Fed has two seats: achieving price stability (control inflation) and supporting full employment. Its main tool to achieve these two goals is to adjust interest rates. When the prices rise too quickly and inflation is above 2% of the Fed target, the FED will enhance the rates, which helps USD values. When inflation drops below 2% or the unemployment rate is too high, the Fed may reduce interest rates that are weighing in the green area.
In extreme situations, the Federal Reserve can also print more dollars and introduce quantitative alleviation (QE). QE is a process in which the Fed significantly increases the credit flow in the detained financial system. It is a non -standard policy measure used in the event of a loan dehydrated, because the banks will not borrow (for fear of the contractor). This is the last last, when just lowering interest rates is unlikely to achieve the necessary result. The weapon of choosing the Fed was a FED weapon to combat the credit crisis, which took place during the great financial crisis in 2008. This includes FED printing more dollars and using them to buy US government bonds mainly from financial institutions. QE usually leads to a weaker American dollar.
Quantitative twist (QT) is the opposite process in which the federal reserve stops buying bonds from financial institutions and does not reinvest from the bonds that it has in recent purchases. This is usually positive for the American dollar.
