• US retail sales data showed an unexpected increase of 1.0% in July.

• The chances of a 50 bps Fed rate cut in September eased to 25%.

• Canadian wholesale trade dipped by 0.6% in June.

The USD/CAD price analysis is slightly bearish as the Canadian dollar recovers from recent lows. Meanwhile, the dollar remained steady after data in the previous session revealed better-than-expected retail sales figures.

On Thursday, the dollar surged as US retail sales data showed an increase of 1.0% in July. It was a big surprise since analysts had expected a 0.3% increase. At the same time, the market view was that the US economy was slowing down rapidly. The sales showed a different picture of resilience, leading to declining Fed rate cut expectations. The chances of a 50 bps rate cut in September eased to 25%.

Furthermore, the outlook of a looming recession shifted as investors cheered a likely soft landing by the Fed. Meanwhile, another report revealed jobless claims fell, indicating a resilient labor market.

At first, these reports strengthened the US dollar and weakened the Canadian dollar. However, the loonie strengthened after markets priced in the new rate-cut bets. A strong US economy is bullish for the Canadian currency because Canada exports most of its oil products to the US. Therefore, high demand boosts Canada’s economy.

Meanwhile, data from Canada showed a dim picture. Canadian wholesale trade dipped by 0.6% in June after a 1.2% drop the previous month. Meanwhile, home sales in the country fell 0.7% in July.

USD/CAD key events today

Neither Canada nor the US will release high-impact economic data today. Therefore, the USD/CAD pair might consolidate.

USD/CAD technical price analysis: Bearish enthusiasm fades near 1.3700 support

On the technical side, the USD/CAD price has stalled near the 1.3700 support level. Although it is below the 30-SMA, the downtrend has weakened. Notably, the RSI has made a bullish divergence, indicating fading bearish momentum.

Price action changed when USD/CAD neared the 1.3700 level. The pair made small-bodied candles and remained near the SMA. Bears were showing exhaustion. Therefore, there is a high chance the trend will reverse with a break above the SMA. On the other hand, if bearish momentum resurges, the price will break below 1.3700 to make a new low.

https://www.forexcrunch.com/blog/2024/08/16/usd-cad-price-analysis-canadian-dollar-recovers-from-slump/