USD/CAD Price Outlook: Rising Support to Challenge Resistance

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US DOLLAR OUTLOOK: USD/CAD EYES RETAIL SALES, FOMC MINUTES, OIL PRICES

US Dollar price action was fairly mixed during Monday’s trading session. The Greenback faced heavy selling pressure versus the Yen, but this was offset by strength against commodity currencies like the Australian Dollar and Canadian Dollar. USD/CAD price action ended up gaining 60-pips on the day, likely with the help from lower crude oil prices. There is a strong positive correlation between CAD and oil. As such, the Canadian Dollar might continue trading on its back foot so long as global growth concerns linger and crude oil remains under pressure.

The US Dollar, meanwhile, is still searching for direction as bulls and bears clash over whether or not the Fed will start tapering asset purchases this year. This brings to focus catalysts with potential to sway the Fed taper timeline – such as the upcoming release of monthly retail sales data. Though not as heavy-hitting as inflation or employment data, the retail sales report due Tuesday at 12:30 GMT does stand to fuel some volatility. This is seeing how hard economic data – like retail sales – stands to either reinforce or undermine the poor consumer sentiment report released late last week.

USD/CAD PRICE CHART: DAILY TIME FRAME (24 MARCH TO 16 AUGUST 2021)

USD/CAD Chart

Chart by @RichDvorakFX created using TradingView

That said, better-than-expected retail sales data could keep pressure on the Fed to start tapering asset purchases before year-end. On the other hand, disappointing retail sales figures might be viewed as a reason for FOMC officials to stay patiently accommodative given the resurgence of covid concerns and downside risks faced by the economy. The former scenario would likely see US Dollar bulls make a push whereas the latter may correspond with broad US Dollar weakness. Nevertheless, from a technical perspective, USD/CAD price action continues to oscillate between two conflicting trendlines.

Technical resistance highlighted by the short-term descending trendline, in addition to the 38.2% Fibonacci retracement level of the latest bearish leg, might keep a lid on USD/CAD. Although, eclipsing the 27 July close at the 1.2600-handle could clear the way for US Dollar bulls to take aim at the 19 July swing high before year-to-date highs come back into focus. Upward pressure on USD/CAD price action is being exerted by the medium-term ascending trendline as higher lows form. Nearside support seems formidable, which is underpinned by month-to-date lows in addition to the bottom Bollinger Band and 50-day simple moving average both perched slightly below.

Keep Reading – US Dollar Forecast: FOMC Minutes to Detail Fed Tapering

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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