The Canadian dollar has reversed directions and lost ground in the Friday session. Currently, USD/CAD is trading at 1.2710, up 0.43% on the day.
After beating a hasty retreat against the major currencies on Thursday, the US dollar has managed to claw back some of these losses on Friday. The Canadian dollar has also followed this trend and jumped almost one percent on Thursday. The currency was lifted as risk sentiment climbed following the FOMC policy meeting. The Fed signalled that it was readying to taper its bond purchase program, but this was contingent on the performance of the economy. Fed Chair Powell referred to two key areas that the Fed is monitoring ahead of a taper – inflation is running well above the Fed target of 2%, while unemployment, which has dropped to 5.2%, still has some ways to go before reaching the Fed goal.
The market take of the FOMC meeting was that a rate hike remains on a low burner, with Fed members split on whether to hike in 2022 or 2023. This fuelled a strong rally of the majors at the expense of the US dollar, as risk appetite improved. The Canadian dollar, which is sensitive to risk sentiment, climbed sharply. Investors were willing to ignore soft Canadian retail sales data for July, as the headline reading came in at -0.6%, compared to a sizzling 4.2% gain a month earlier.
The Canadian dollar faces a major test next week, with the release of GDP for July. The June reading showed a modest gain of 0.7%, and another gain could give the Canadian currency a boost.
USD/CAD Technical
- USD/CAD has broken above resistance above 1.2659. This is followed by resistance at 1.2829
- There is support at 1.2545. Close by, we find support at 1.2489
