The USDCAD currency pair held above the support at 1.315 and started to rebound. By the current moment it has reached the level of 1.32, and now the buyers are aiming at the next important mark of 1.33. Recent news regarding the state of the US and Canadian economies indicate a high probability of USDCAD further growth.
On Friday, the Personal Consumption Expenditures Price Index (PCE) was published. The figures came in slightly better than expected, with the overall figure falling from 3.8% to 3% with a forecast of 3.1%, while the core PCE slowed from 4.6% to 4.1% with a forecast of 4.2%. Inflation statistics indicate that the situation is gradually normalizing, but the value of the core PCE above 4% does not give reason to relax. This was confirmed yesterday by the head of Minneapolis Federal Reserve Bank Neel Kashkari, who promised to vote in favor of raising rates at the fall meetings of the Fed if necessary.
In addition to data from the U.S., Friday also saw the release of preliminary Canadian GDP statistics for June. The Canadian economy unexpectedly contracted by 0.2% in the first month of summer. This means that GDP growth for Q2 2023 is only 1% against expectations of 1.5%. Severe fires that hampered oil and gas production across Canada were the reason behind the adverse GDP data. The oil and gas sector of the economy fell by 6.6% in June.
Due to the economic downturn that began, analysts are now confident of the end of the Bank of Canada's rate hike cycle. July's 0.25% rate hike is likely to be the last one for the Canadian regulator. Doug Porter, Chief Economist at BMO Capital Markets, expects Canadian GDP dynamics to be around zero in the second half of the year. This will drive the USDCAD growth, especially considering the resilience of the U.S. economy.
The USDCAD uptrend will become more evident in case of consolidation above the level of 1.33. But before that, bulls still have an intermediate target at 1.328.
Consider the following trading strategy:
Buy USDCAD in the range of 1.32-1.325. Take profit 1 - 1.328. Take profit 2 - 1.33. Stop loss - 1,315.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
