The US dollar is up against the loonie after Oil lost ground to the USD; just six sessions ago, the commodity reached its lowest level since the beginning of the year. Canada relies heavily on the export of commodities; lower Oil prices affect the value of USDCAD.
The US released high-impact economic indicators earlier in the session. The US retail sales expert consensus was at 9%; the result was slightly higher at 9.1%, strengthening the USD.
The US also released Initial Jobless Claims this morning; the result came out better than expected and better than the previous week’s figure (218K). The consensus was 226K, while the actual number was 213K.
The US labor market has been one of the columns holding the US economy despite the efforts from the Federal Reserve to slow down economic activity to control inflation. The Fed is expected to continue hiking interest rates aggressively to restore price stability.
Next week, Canada will release high-impact economic indicators that will bring high volatility to the CAD exchange rate against its major currency counterparts. On Tuesday, Canada will release the Inflation Rate; the expert consensus is at 7.5%, a slight decrease from the previous 7.6%.
On Friday, Canada will release Retail Sales, which are expected to have a significant drop from 11% to 3.5%; this means that the Canadian economic activity is slowing down at a high rate, and the Bank of Canada could see this as a favorable scenario to maintain the interest rate at 3.25% at the October Interest rate decision.
The general trend continues to be upward as the price is above the short and long-term moving averages; the trend lines crossed at the end of August, and the pair found a strong pullback that lasted four days, but the USD regained that ground in the last three trading sessions and is now at a 22 month high.
The Bollinger bands are opening up and moving upwards, suggesting that the price will likely continue the rally and that volatility will be high in the upcoming trading sessions. The pair is trading very close to the upper band and could find strong resistance at $1.32485.
The relative strength index is at 64%, which will limit the uptrend in the short term; once it gets closer to 70%, we could see a temporary retracement; the support level is at 1.30952 on our 23.6% Fibonacci retracement.
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