It has been a quiet week for the Canadian dollar. On Thursday, USD/CAD is trading at 1.3204, up 0.19% on the day.
US retail sales miss forecasts
In Canada, inflation levels were within expectations, which resulted in a muted response from the Canadian dollar. CPI rose 0.1% in August, while the core reading posted a gain of 1.7% for a second straight month. Over in the US, retail sales slowed in August and missed the forecasts, raising concerns about the strength of the economy. The headline reading fell to 0.7%, down from 1.2%. The estimate stood at 1.1%. Core retail sales gained 0.7%, well off the pace of 1.9% a month earlier. This fell short of the estimate of 1.0%. The slowdown is a worrying sign and points to the economic recovery faltering.
Fed sends markets dovish message
There were no surprises from the Federal Reserve, which kept the Fed Funds Rate between 0.00% and 0.25%, where they have been pegged since March. The Fed recently announced a major change in policy, saying that it would now adopt an “average inflation target” of 2%, which means that the Fed would allow inflation to overshoot the 2% threshold before it hiked rates. This policy shift has put downward pressure on the US dollar, because the Fed is not expected to raise rates before 2023. At its meeting, the Fed said that it would maintain an accommodative monetary policy, and we can expect to hear this stance repeated for many months to come.
US Open – Powell leaves the bazooka at home
USD/CAD Technical
- There is weak resistance at 1.3211, followed by resistance at 1.3243
- 1.3138 is the first line of support. Below, there is support at 1.3097, just below the 1.31 level
- USD/CAD continues to put downward pressure on the 10-day MA. If the pair breaks below this line, it would be an indication of a downward trend
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