USDCAD on Friday dropped -0.68% to 1.35070. Week ending 2024-08-23 moved lower by -1.25%. What you need to know.

USDCAD Analysis

Performance
Period	Pct	Chg	Momentum
Friday	-0.68%	-93 Pips
Week 2024-08-23	-1.25%	-171.3 Pips
August	-2.18%	-301.3 Pips

Upcoming key events for the new week (London Time)

Thu 01:30 PM Initial Unemployment Insurance Claims
Thu 01:30 PM GDP annual rate
Fri 01:30 PM GDP (12-mth)
Fri 01:30 PM PCE Price Index (excluding food and energy) (1-mth)
Fri 01:30 PM PCE Price Index (excluding food and energy) (12-mth)

What happened over the week

Federal Reserve Chair Jerome Powell indicated potential rate cuts in September during the Jackson Hole Symposium, as the labor market shows signs of cooling and economic uncertainty persists. In the U.S., the number of initial unemployment insurance claims for the week ending August 17 increased to 232,000, slightly above the previously revised figure of 228,000, according to the Department of Labor. These developments suggest that while the U.S. job market is softening, the Federal Reserve might adopt a more accommodative monetary policy stance to spur economic activity.

In Canada, retail trade for June showed improvement, with a month-over-month decline of -0.3%, up from the -0.8% in May, an indication that consumer spending is recovering, according to Statistics Canada. Excluding automobiles, retail trade in June increased by 0.3%, significantly better than the revised -1.2% in May. On the inflation front, the Bank of Canada reported that core inflation on a 12-month basis dropped to 1.7% in July from 1.9% in June. Also, the broader CPI inflation rate for July decreased to 2.5% from 2.7% in June, as reported by Statistics Canada. However, the month-over-month core CPI rose slightly to 0.3% from -0.1% in June, and the overall month-over-month CPI was up to 0.4% from the previous month’s -0.1%.

The weakening economic data from the U.S., particularly the spike in initial unemployment claims and Powell’s dovish comments, are likely to put downward pressure on the U.S. dollar (USD). Simultaneously, the slightly better retail trade data and easing inflation in Canada suggest a relatively healthier economic environment, which may bolster the Canadian dollar (CAD). The combined effect of these factors has already contributed to the USDCAD falling by 0.68% to 1.35070 on Friday, and by 1.25% over the week ending August 23, 2024. As markets continue to digest these economic signals and anticipate upcoming key data releases, including GDP and inflation figures from both the U.S. and Canada, the USDCAD is likely to remain volatile with potential further depreciation of the USD against the CAD.

From X (Twitter)

The Consumer Price Index (#CPI) rose 2.5% on a year-over-year basis in July 2024, increasing at the slowest pace since March 2021 and down from a 2.7% gain in June 2024. https://t.co/t7v74P9QX4 pic.twitter.com/GrmqcI6Phy

— Statistics Canada (@StatCan_eng) August 20, 2024

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

USDCAD on Friday dropped -0.68% to 1.35. Price is below 9-Day EMA while Stochastic is falling in oversold zone. For the week ending 2024-08-23, the pair dropped -1.25% or -171.3 pips lower.

Looking ahead, USDCAD looks bearish as the pair posted lower in Friday trading session.

For the new week, our technical outlook looks bearish, immediate support level is at 1.35 (WS1) with break below could see further selling pressure towards 1.34 (WS2). For potential buyers, as the current momentum is bearish, we prefer to look at firm break of the week high of 1.36 as an important indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below week low of 1.35 would indicate selling pressure.

For the month of August, USDCAD is down by -2.18% or -301.3 pips lower.

Weekly key levels to watch out:

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Powell, Review and Outlook Source: Federal Reserve
Monthly Survey of Manufacturing: Flash estimate, July 2024 Source: Statistics Canada
Retail trade, June 2024 Source: Statistics Canada
Monthly Survey of Manufacturing: Flash estimate, July 2024 Source: Statistics Canada
Retail trade, June 2024 Source: Statistics Canada
Quarterly Services Survey Source: Census Bureau
Minutes of the Federal Open Market Committee, July 30–31, 2024 Source: Federal Reserve
New Housing Price Index, July 2024 Source: Statistics Canada
Consumer Price Index, July 2024 Source: Statistics Canada