After starting the trading week with strong gains, the Canadian dollar has taken a pause. Currently, USD/CAD is trading at 1.2407, up 0.09% on the day.
Earlier in the day, the Canadian dollar broke below the 1.24 line and is trading close to 6-week highs. The US dollar continues to struggle and unless US yields move higher, it could continue to be a bumpy road for the greenback.
Retail Sales could extend CAD rally
There were no Canadian releases on Monday, but that didn’t stop the Canadian dollar from posting strong gains. This reflected weakness in the US dollar rather than strength in the Canadian currency. On Wednesday, Canada releases Retail Sales for February, which should be treated as a market-mover (12:30 GMT). The consensus is for a sharp gain, which could boost the Canadian dollar. The headline reading is expected to come in at 4.0%, after a decline of -1.1% beforehand. Core Retail Sales is projected to climb 3.2%, up from -1.2%.
After the Canadian Retail Sales reports, investors will shift their focus to the Federal Reserve, as the FOMC will wind up its policy meeting and deliver a rate statement (18:00 GMT). The Federal Reserve continues to send a steady message to the markets that it has no intention of veering from its dovish stance and is not contemplating a taper of its QE program, and an interest hike is unlikely anytime soon. Nevertheless, as economic indicators continue to point upwards, the Fed may have to tighten policy more quickly than it anticipated. Investors will be monitoring the FOMC rate statement and follow-up comments from Fed Chair Powell, and any clues about a change in policy could trigger volatility from the US dollar.
- On the upside, there is resistance at 1.2600. Above, there is resistance at 1.2723
- USD/CAD is testing support at 1.2407. This is followed by support at 1.2386
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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