USDCAD rises by 0.15% to 1.36090 amid Federal Reserve’s dovish stance and mixed economic data

USDCAD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.15%	19.8 Pips
Week to-date	0.23%	31.3 Pips
September	0.89%	119.9 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In the United States, recent economic data reveals several key developments. The Federal Reserve has adjusted its interest rate projections downward across multiple timeframes. The interest rate for the upcoming year is now projected at 3.4%, a significant drop from the previous forecast of 4.1%, and the second-year rate projection declined slightly to 2.9% from 3.1%. The interest rates for the longer-term were minimally increased to 2.9% from 2.8%, and the third-year forecast remains unchanged at 2.9%. Moreover, the Federal Funds Rate, which is the focal point of monetary policy, declined to 5% from its previous rate of 5.5%. This decision reflects a broader move towards more accommodative monetary conditions.

On the housing front, building permits in August rose to 1.475 million from a revised figure of 1.406 million in July, while housing starts increased to 1.356 million from a revised figure of 1.237 million. These upward trends in the housing sector signal a strengthening in residential construction activity. Additionally, industrial production rose to 0.8% in August from -0.6% in July, indicating an expansion in manufacturing output. However, retail trade metrics showed a mixed performance; the Retail Trade Control Group slightly decreased to 0.3% from 0.4% in July, and monthly retail trade excluding automobiles dropped to 0.1% from 0.4%.

The recent decline in US interest rate projections and the Federal Reserve’s decision to lower the Federal Funds Rate imply a more dovish stance in monetary policy, which typically results in a weaker US dollar. Consequently, the value of the US dollar against other currencies, including the Canadian dollar, is expected to decrease. However, the recent rise in USDCAD to 1.36090 suggests that other factors, such as Canada’s economic performance or global market conditions, might have also influenced this rate. Over the short term, the weaker economic data from the U.S., particularly in retail, combined with reduced interest rate expectations, are likely to exert downward pressure on the USDCAD. This would suggest a potential appreciation of the Canadian dollar relative to the US dollar unless there are offsetting positive economic developments from the Canadian side.

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What can we expect from USDCAD today?

USDCAD on Wednesday rose 0.15% to 1.36090. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for USDCAD looks bullish as the pair ended higher after Wednesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.36423 with break above could target R2 at 1.36755 or figure level area. While towards the downside, we are looking at daily low of 1.35370 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.36229 may suggest continuation after recent positive movement.

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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