USDCAD on Friday dropped -0.1% to 1.38690. Week ending 2024-08-02 rose 0.3%. What’s going on.

USDCAD Analysis

Performance
Period	Pct	Chg	Momentum
Friday	-0.1%	-13.3 Pips
Week 2024-08-02	0.3%	41 Pips	August	0.44%	60.7 Pips

Upcoming key events for the new week (London Time)

Mon 06:00 AM August Civic Holiday
Thu 01:30 PM Initial Unemployment Insurance Claims
Fri 01:30 PM Net Change in Employment

What happened over the week

In the United States, there has been a notable softening in several key economic indicators. Factory orders in June decreased significantly to -3.3%, markedly down from the -0.5% recorded in May, according to the Census Bureau. The Bureau of Labor Statistics reported that U.S. average hourly earnings for July grew by only 0.2%, slightly down from a 0.3% rise in June. Nonfarm payroll employment in July was 114,000, a substantial drop from June’s revised figure of 179,000. The Q2 flash estimate for unit labor costs fell sharply to 0.9% from 4% in Q1, while nonfarm business labor productivity improved to 2.3% from 0.2% in the previous quarter. Initial unemployment insurance claims for the week ending 27 July increased to 249,000 from the previous week’s 235,000, as reported by the Department of Labor. The Federal Reserve maintained the federal funds rate at 5.5%. The Employment Cost Index (ECI) in Q2 decreased to 0.9%, down from 1.2% in Q1. Job openings through the Job Openings and Labor Turnover Survey (JOLTS) in June decreased slightly to 8.184 million. Lastly, the House Price Index for May remained flat, following a 0.3% rise in April as revised by the FHFA.

In Canada, economic activity also showed a deceleration. Statistics Canada reported that the GDP growth for May was 0.2%, falling from the 0.3% growth seen in April.

The recent string of pessimistic economic data from the United States, combined with stable Canadian GDP, likely contributed to the slight depreciation of the USDCAD exchange rate, which dropped by -0.1% to 1.38690 on Friday. A weaker U.S. economic performance and subdued wage growth could reduce investor confidence in the U.S. dollar. Conversely, despite the dip in Canadian GDP growth, the overall comparative stability of Canada’s economic activities may have provided some support for the Canadian dollar. Consequently, while weaker U.S. economic data pressured the dollar, this was slightly offset by the broader trend over the week ending 2024-08-02, when USDCAD rose by 0.3%, reflecting the initial reactions to differing economic signals and investors’ balancing of near-term outlooks.

From X (Twitter)

Real gross domestic product (#GDP) grew 0.2% in May 2024, following a 0.3% increase in April. https://t.co/B77ZbWDTBG pic.twitter.com/FMUphsedNA

— Statistics Canada (@StatCan_eng) July 31, 2024

What can we expect from USDCAD for the new week and what happened on Friday?

USDCAD on Friday dropped -0.1% to 1.39. Price is above 9-Day EMA while Stochastic is rising. For the week ending 2024-08-02, the pair rose 0.3% or 41 pips higher.

Looking ahead, USDCAD looks mixed as the pair is likely to consolidate above week low of 1.38.

For the new week, our technical outlook looks bullish, immediate upside resistance level at 1.39 (WR1) with break above could target 1.39 (WR2). On the downside, we are looking at week low of 1.38 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.39 would suggest bullish bias after recent positive movement.

For the month of August, USDCAD is up by 0.44% or 60.7 pips higher.

Weekly key levels to watch out:

You might also be interested in:

Construction Spending Source: Census Bureau
Gross Domestic Product for Puerto Rico, 2022 Source: Bureau of Economic Analysis
Federal Reserve issues FOMC statement Source: Federal Reserve
Housing Vacancies and Homeownership Source: Census Bureau
Rental Vacancy Rate Source: Census Bureau
Gross domestic product by industry, May 2024 Source: Statistics Canada