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USDCAD Market Update

8/15/2022 2:06 PM

The American currency is gaining in value after the release of positive macroeconomic statistics from the US last Friday and is currently trading around 1.2856.

Thus, the Michigan Consumer Expectations Index for August turned out to be much higher than analysts' forecasts, amounting to 54.9 points against the expected 48.4 points, while the Michigan Consumer Sentiment Index for the same period rose to 55.1 points, exceeding projected 52.5 points and the previous figure at the level of 51.5 points. In addition, for the first time since January of this year, Export Price Index decreased on a monthly basis by 3.3%, and Import Price Index declined by 1.4%. On an annualized basis, the Export Price Index rose by 13.1%, which is less than the June figure of 18.2%, and the Import Price Index increased by 8.8% after rising by 10.7% in the previous month, which indicates a decrease in inflation dynamics.

Strong data on Consumer Expectations and Sentiment will allow the US Federal Reserve to act more decisively if the economic situation requires it, but now the market participants are preparing to a slowdown in the pace of interest rate hikes to 50 basis points.

Against this background, USD/CAD is growing after reaching the support area of 1.2780–1.2740. Nevertheless, the positive dynamics is a correction to the fall in July-August. It is likely that as part of the growth, market participants can test the resistance at 1.2935 and, if it is held, then the decline will continue, and the August low at 1.2740 will be updated.

As part of the medium-term trend, target zone 2 (1.2777–1.2756) was reached last week; it was held, causing fixation of sales and opening of speculative purchases with the target of 1.2850, in case of upward breakdown of which, the correction will continue to the key trend resistance of 1.2966–1.2945. Otherwise, the price will decrease, and the last week's low will be updated.

Resistance levels: 1.2935, 1.3065, 1.3157. | Support levels: 1.2780, 1.2740, 1.2525.

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