USD/CAD Reacts to US Dollar Advance
The USD/CAD pair experienced significant movement today as the US Dollar made substantial gains against European currencies. The pair rose rapidly from the mid to upper 1.39s to an intraday high near 1.4020. Despite this, the Canadian Dollar (CAD) managed to build on its gains against the Euro (EUR), reaching a level of 1.45. This resulted in losses for the EUR/CAD pair for the week, with a decrease of 2.7% from Monday’s peak, as highlighted by Scotiabank’s Chief FX Strategist Shaun Osborne.
Factors Driving the CAD Performance
- The CAD remains a strong performer among the G10 pairs, despite being susceptible to broader USD strength.
- Retail Sales are expected to rise by 0.4% in September, in line with the flash estimate from August, which saw a 0.4% month-on-month increase.
- Scotiabank’s projection for Retail Sales is slightly above consensus at 0.5% month-on-month.
Government Support Measures
The Canadian Federal government recently announced temporary sales tax holidays and one-time rebates for most households in an effort to garner support in parliament and among voters. While these measures are expected to provide only a marginal boost to consumption, they are aimed at stimulating economic activity.
Technical Analysis and Market Outlook
Following a rebound from yesterday’s low, the USD’s gains have been capped around the 1.4015/20 minor resistance level, which was Wednesday’s high. This rebound indicates a potential short-term low for funds, suggesting a period of consolidation around 1.40 before further upside potential. A break above 1.4020 in the coming sessions could lead to a retesting of recent peaks around 1.41.
Analysis and Conclusion
In summary, the USD/CAD pair experienced significant volatility driven by the US Dollar’s strength and the CAD’s resilience against the Euro. With Retail Sales data and government support measures influencing market sentiment, investors should monitor key levels such as 1.4020 for potential breakout opportunities. The technical analysis suggests a short-term consolidation phase before a possible move towards 1.41.