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Canadian Dollar slips as US yields retreat despite strong economic data.
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Fed’s Waller backs July rate cut, weighing on USD/CAD.
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USD/CAD breaks below 50-day SMA, eyes next support at 20-day SMA.
The Canadian Dollar (CAD) advanced against the US Dollar (USD) on Friday, buoyed by dovish signals from the Federal Reserve despite upbeat US economic data. At the time of writing, USD/CAD trades just above 1.3720, down around 0.20% on the day.
Fed’s Waller Supports July Rate Cut, Weighs on USD
Federal Reserve Governor Christopher Waller sparked fresh market speculation after calling for a 25 basis point rate cut at the upcoming July FOMC meeting. In a Bloomberg interview, Waller pointed to signs of slowing private sector job growth and downplayed inflation risks from potential tariffs, suggesting these effects would be temporary.
Although June’s Housing Starts and Building Permits surprised to the upside, rate cut bets for September have increased, further pressuring the US Dollar. Political uncertainty around Fed Chair Powell’s reappointment and lack of progress on trade negotiations ahead of the August deadline are also capping USD strength.
The University of Michigan’s preliminary Consumer Sentiment Index for July rose to 61.8 from 60.7 in June, beating expectations. Inflation expectations showed signs of easing: the 1-year outlook fell to 4.4% (from 5%), and the 5-year projection dipped to 3.6% (from 4%). This supports the case for a more accommodative Fed stance and contributed to Friday’s pullback in the Greenback.
Technical Outlook: Neutral Bias with Key Levels in Focus
USD/CAD is currently consolidating after a prior downtrend and is hovering near the 78.6% Fibonacci retracement level of the September–February rally at 1.3714. The pair is slightly above the 20-day Simple Moving Average (SMA) at 1.3674, offering modest near-term support, while the 50-day SMA at 1.3733 acts as immediate resistance.
The Relative Strength Index (RSI) sits at 51, indicating a neutral momentum.
Key Levels:
- Resistance: 1.3733 (50-day SMA), 1.3798 (June high), 1.3823 (May high), 1.3900 (psychological level)
- Support: 1.3674 (20-day SMA), 1.3600 (psychological), 1.3540 (June low), 1.3419 (September 2024 low)
The broader technical picture remains cautiously neutral, with a potential bullish breakout if key resistance levels are breached. Until then, the Canadian Dollar may continue to find support from easing US inflation fears and rising expectations of a Fed rate cut.
