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USD/CAD hovers around 1.3575 as traders weigh mixed U.S. Retail Sales data and anticipate the Fed’s policy decision.
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Firm crude oil prices and escalating Middle East tensions provide underlying support to the Canadian Dollar.
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The pair trades within a descending wedge pattern, with the RSI suggesting a potential slowdown in the recent downtrend.
The Canadian Dollar (CAD) holds steady against the US Dollar (USD) on Tuesday, with the USD/CAD pair trading sideways near 1.3575 as markets digest mixed U.S. economic data and brace for Wednesday’s Federal Reserve policy decision.
Despite recent volatility, USD/CAD remains range-bound following Monday’s dip to an eight-month low, as traders balance a cautious global mood with rising geopolitical tensions in the Middle East and expectations around U.S. monetary policy. The ongoing conflict between Israel and Iran continues to threaten the stability of the Strait of Hormuz, supporting Oil prices and, in turn, helping the oil-linked Canadian Dollar limit its downside.
Mixed U.S. Retail Sales Send Conflicting Signals
The latest U.S. Retail Sales data delivered a mixed narrative for consumer spending. Headline sales fell by 0.9% in May — the largest decline since early 2024 — missing forecasts of a 0.7% drop. Excluding autos, sales also declined 0.3%, suggesting broad-based consumer weakness.
However, the GDP-linked control group component rose 0.4%, rebounding from April’s -0.1% and signaling some resilience in core consumption trends. This divergence complicates the Fed’s policy outlook: while weaker headline figures support the case for rate cuts, strength in the control group offers a counterbalance that may delay any shift.
Tensions in the Persian Gulf are keeping global markets on edge, especially given the region’s role in global energy supply. As a commodity currency, the CAD continues to draw strength from elevated crude oil prices, which have remained firm amid fears of supply disruption.
Near-term movements in USD/CAD will likely hinge on Middle East developments and market reaction to the Fed’s interest rate guidance and economic projections on Wednesday.
Technical Outlook: Support Holds, but Momentum Wanes
USD/CAD is hovering around 1.3580, clinging just above key support at the lower boundary of a descending channel. The pair has struggled to break decisively below 1.3540 — a level that, if breached, could expose November 2024’s low near 1.3419.
Short-term resistance lies around 1.3640–1.3710, in line with the 10-day, 20-day, and 50-day Simple Moving Averages. The Relative Strength Index (RSI) sits near 29 and is beginning to rise, hinting that downside momentum is slowing and a short-term bounce could be in play if bullish sentiment strengthens.
Traders remain focused on Fed signals and oil market fluctuations as key catalysts for the next directional move in USD/CAD.
USD/CAD daily chart
