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Fundamental Forex Analysis

USD/CAD struggles near session lows, holds above 1.3500 mark post-US data

  • USD/CAD drifts back into the bearish territory amid the prevalent USD selling bias.
  • A goodish pickup in oil prices underpinned the loonie and exerted some pressure.
  • The USD failed to benefit from rallying US bond yields and upbeat US retail sales.
  • Investors now look forward to Powell’s testimony for some meaningful impetus.

The USD/CAD pair edged lower during the early North American session and dropped to the lower end of its daily trading range, around the 1.3520 region post-US macro data.

The pair failed to capitalize on its attempted intraday recovery move, rather met with some fresh supply near the 1.3600 round-figure mark and drifted into the negative territory for the third consecutive session. The downtick was sponsored by a goodish pickup in crude oil prices, which tend to underpin demand for the commodity-linked currency – the loonie.

However, a modest US dollar rebound from lows extended some support to the USD/CAD pair and helped limit deeper losses. The global risk sentiment remained well supported by the Fed’s latest changes to its bond-buying program and triggered a strong rally in the US Treasury bond yields. This, in turn, eased the recent bearish pressure surrounding the greenback.

The intraday USD uptick got an additional boost following the release of stronger-than-expected US monthly retail sales, though was quickly sold into amid the prevalent risk-on mood. Data released this Tuesday showed that the headline sales recorded a strong 17.7% growth in May as compared to an 8% rise expected and the previous month’s upwardly revised reading of -14.7%.

Adding to this, figure excluding autos rose 12.4% as against 5.5% growth anticipated. Meanwhile, the closely watched Retail Sales Control Group also surpassed even the most optimistic estimates and climbed 11%, reversing a major part of April’s decline of 12.4% (revised higher from -15.3% reported previously). The data, however, failed to impress the USD bulls.

With Tuesday important US macro data out of the way, the focus now shifts to the Fed Chair Jerome Powell’s testimony before the Senate Banking Committee. Powell’s remarks will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the USD/CAD pair.

Technical levels to watch

 

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