USDCAD drops 0.14% as mixed economic signals from Canada and US surface

USDCAD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.14%	-18.7 Pips
Week to-date	-0.03%	-3.7 Pips
October	1.85%	250.3 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In Canada, the economic data reveals mixed signals. The Bank of Canada’s Core Inflation CPI for September shows a slight increase, now at 1.6% compared to 1.5% in August. However, the general Consumer Price Index (CPI) Inflation Rate for September decreased to -0.4% from -0.2% the previous month, indicating a decline in consumer price levels. Moreover, the Bank of Canada’s Core CPI Inflation Rate improved to 0% from -0.1% in August. Meanwhile, Canada’s CPI inflation rate for a 12-month period in September fell to 1.6%, down from 2% in August. This indicates an overall decreasing inflationary pressure in the Canadian economy, suggesting lessened price increases over the year. Sources for this data include the Bank of Canada and Statistics Canada.

In the United States, the economic situation also presents challenges. The New York Empire State Manufacturing Index saw a substantial drop to -11.9 points in October from 11.5 points in September, a sign of contracting manufacturing activity in the region. The New York Fed reports this downturn, indicating headwinds for U.S. manufacturing sectors in the current economic climate.

Regarding the USDCAD currency pair, the combination of Canadian and U.S. economic data suggests potential implications. The strengthening of Canada’s core inflation indicators, albeit minor, alongside declining general inflation, might hint at underlying economic resilience, which could support the Canadian dollar. On the other hand, the sharp decline in the U.S. manufacturing index reflects economic weakness, potentially putting downward pressure on the U.S. dollar. Consequently, these factors collectively led to a 0.14% drop in the USDCAD to 1.37775. It’s crucial to consider the impact of upcoming U.S. economic announcements, such as the highly impactful Monthly Retail Trade data, which could further influence this currency pair.

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What can we expect from USDCAD today?

USDCAD on Tuesday dropped -0.14% to 1.37775. Price is above 9-Day EMA while Stochastic is falling in overbought zone.

Updated daily direction for USDCAD looks bearish as the pair posted lower in Tuesday trading session.

Looking ahead for the day, immediate support level is at S1 1.37488 with break below could see further selling pressure towards S2 at 1.37202. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.38385 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.37650 would indicate selling pressure.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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