USD/CAD has seen little movement around the 1.3700 level following the release of key economic data for both Canada and the US. The Canadian GDP figures for April showed a 0.3% increase, indicating a strong performance by the Canadian economy. This growth was in line with expectations and was seen as a positive sign, although it is unlikely to change the belief that the Bank of Canada will lower interest rates in July.
On the other hand, the US Personal Consumption Expenditures (PCE) Price Index, which is closely monitored by the Federal Reserve, revealed a slight cooling of inflation in May. The year-on-year PCE fell to 2.6% from 2.7% in April, while the Core PCE dropped to 2.6% from 2.8%. This data suggested progress towards the Fed’s 2.0% inflation target, but it also raised the possibility of a September interest-rate cut.
Market analysts have noted that the decline in PCE inflation could influence the Fed’s decision-making process, with some predicting a higher likelihood of a rate cut in the near future. The overall performance of the US Dollar against the Canadian Dollar was also impacted by the outcome of the Presidential debate, which was perceived to favor Donald Trump.
From a technical perspective, USD/CAD has been trading within a range since its failed attempt to break out of a Symmetrical Triangle pattern in early June. The current price action suggests a bearish sentiment, but a break above 1.3791 could signal a bullish continuation towards the 1.3850 level. Conversely, a break below 1.3624 would indicate a downside breakout with a target at 1.3590.
In conclusion, the recent economic data releases for both Canada and the US have influenced the trading dynamics of USD/CAD. While the Canadian GDP growth was viewed positively, expectations of a rate cut by the Bank of Canada have limited the downside potential for the currency pair. On the other hand, the cooling inflation in the US has raised speculations of a Fed rate cut, contributing to the overall performance of the USD. Traders will continue to monitor these factors closely to assess the future direction of USD/CAD trading.