USD/CAD Faces Headwinds Amidst Mixed Economic Data and..

USD/CAD Faces Headwinds Amidst Mixed Economic Data and Oil Price Surge

Introduction:

The USD/CAD currency pair has been grappling with selling pressure for the fifth consecutive day during the Asian session on Friday. This comes as a result of various factors, including lower-than-expected Initial Jobless Claims in the United States, a notable surge in oil prices benefiting the Canadian Dollar, and the anticipation of key economic data releases.

The Break Below 1.3500:

During the early Asian trading session, the USD/CAD pair lost traction and broke below the crucial 1.3500 area, reflecting a decline of 0.10% on the day. This move signifies a growing preference for the Canadian Dollar over its US counterpart among traders.

US Economic Data and Fed's Stance:

Federal Reserve Chairman Jerome Powell's recent remarks at the Jackson Hole Symposium indicated that potential rate hikes would depend on incoming data. However, the mixed economic data from the US on Thursday could pose a challenge to the Fed's plan to maintain higher interest rates.

The most recent Initial Jobless Claims data for the week ending August 25 showed a decline to 228,000, falling short of the market consensus of 232,000. Although this marked the lowest level in four weeks, Continuing Claims reached their highest level in six weeks. Additionally, the US Core Personal Consumption Expenditure (PCE) Price Index rose to 4.2% in July, matching expectations. This led to a weakening of the US Dollar against the Canadian Dollar.

Canadian Economic Indicators:

On the Canadian front, Statistics Canada reported a narrowing of the Current Account deficit for the second quarter, dropping to C$6.63 billion from C$3.17 billion in the previous quarter. Moreover, the surge in oil prices, boosted by Canada's status as the largest exporter of crude to the US, has contributed to the strength of the Canadian Dollar.

Upcoming Economic Data:

As market players closely watch the developments in the USD/CAD pair, they eagerly await two key economic indicators: the highly-anticipated US Nonfarm Payrolls report and the Canadian Gross Domestic Product (GDP) data for the second quarter. The anticipated annual growth in Canadian GDP is expected to be 1.2% from the previous reading. Meanwhile, the US economy is projected to have created 170,000 jobs in August. Additionally, the Unemployment Rate and ISM Manufacturing PMI figures will be released, further shaping the direction of the USD/CAD pair.

Conclusion:

The USD/CAD pair is currently facing a range of influences, from mixed economic data in the United States to the surge in oil prices that supports the Canadian Dollar. Traders are eagerly awaiting the release of crucial economic indicators, which are expected to provide fresh impetus and direction to this currency pair. As economic uncertainties persist, the USD/CAD pair remains one to watch closely for forex traders and market participants alike.


Our preference

Short positions below 1.3530 with targets at 1.3475 & 1.3450 in extension.