The USD/CAD pair experiences a strong bounce towards 1.3700 after disappointing Canadian Retail Sales figures for March. The unexpected contraction in retail activity fuels CAD weakness and supports the USD.
Key Factors:
- Canadian Retail Weakness: Lower-than-expected Retail Sales suggest softening consumer demand, potentially increasing expectations for earlier-than-anticipated rate cuts by the Bank of Canada (BoC).
- US Data Focus: Investors await this week’s critical US data releases – Q1 Gross Domestic Product (GDP) and core Personal Consumption Expenditure (PCE) Price Index – for clues on the Federal Reserve’s rate trajectory.
- Lingering PMI Impact: The weak US PMI data from Tuesday continues to limit significant USD upside.
Outlook:
The USD/CAD pair’s near-term direction hinges on the upcoming US economic data releases. A positive surprise in GDP and PCE figures could reignite Fed hawkishness and propel USD/CAD higher. Conversely, softer-than-expected US data might weaken the USD and lead to a decline in USD/CAD.
Technical Levels to Watch:
- Resistance: Immediate resistance lies around 1.3700, with further potential resistance near 1.3750.
- Support: Initial support remains near 1.3660, with a break potentially opening a path towards 1.3600.
