USD/CAD Plunges After Dismal U.S Data

Fundamental Analysis

*Data Dud: The Canadian dollar strengthened against the U.S. dollar following the release of U.S. retail sales data for January. According to the U.S. Census Bureau, retail sales—a key indicator of consumer spending—fell by 0.9%, a sharper decline than the anticipated 0.1%. In contrast, December’s figure was revised upward to a 0.7% increase from the previously reported 0.4%. From a technical perspective, a drop in household spending signals weakened purchasing power, which could prompt the Federal Reserve (Fed) to consider monetary easing. Lower consumer spending typically leads to reduced inflationary pressures, increasing the likelihood that traders will scale back expectations of the Fed maintaining interest rates at 4.25%-4.50% for an extended period.

Technical Analysis

*Technical Breakout: USDCAD was traded lower following recent breakout below the previous support level 1.41900. MACD which illustrate bearish bias signal suggest the pair to likely extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 1.40800. Conversely, a potential reversal is also to be expected and the price could head back towards 1.43000 after it breach back above the level 1.41900.

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Potential Risks

Looking ahead, traders will seek further direction from key upcoming events this week, including the FOMC Meeting Minutes, S&P Global Manufacturing and Services PMI, and speeches from President Donald Trump.

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Monitoring

Stay updated on US and Canada data, global market updates, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.