The Canadian dollar has posted considerable losses in the Friday session. Currently, USD/CAD is trading at 1.2746, up 0.34% on the day.
US dollar flexes muscles
The US dollar is showing some strength on Friday, with gains against its G-10 counterparts. The US dollar index is up slightly, to 90.62. The index remains bound between the 90 and 91 levels. A move below 90 or above 91 could have a significant impact on the movement of the dollar.
It’s been a quiet week for the Canadian dollar, in large part due to the absence of any Canadian events this week. We’ll get a look at Wholesales Sales, a leading indicator of consumer spending. Analysts are bracing for a weak read of -1.6%, which would mark the first decline since April. This was at the start of the Covid-19 pandemic, and the indicator plunged a stunning 21.6% that month.
The Federal Reserve has made crystal clear that it remains in ultra-accommodative mode and has welcomed the massive stimulus program which the Biden administration will unleash as soon as it winds through Congress. The Fed is on record as saying it won’t tighten policy before 2024. Will the Bank of Canada precede the Fed with a rate hike? Unlikely, according to the CIBC, which notes that the Canadian economy fell further than the US in 2020. Additionally, Canada is lagging behind the US in the vaccine rollout and the BoC has voiced its concerns about the stronger Canadian dollar. This all points to the BoC staying on the sidelines until the Fed hikes interest rates first.
- USD/CAD is testing support at 1.2725. Below, there is support at 1.2689
- The pair is putting upward pressure on the 50-day moving average (MA), which is at 1.2760. A daily close above this line is a technical bullish signal.
- There is resistance at 1.2834. This is followed by resistance at 1.2907
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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