USD/CAD Eyes 1.32 on Economic Indicators Supporting 75 bps

It was a busy start to the US session for the USD/CAD. From the US, jobless claims, Philly Fed Manufacturing, and retail sales figures influenced. The stats were dollar negative, easing bets of a percentage point rate hike that spiked in response to the August CPI report.

In August, core retail sales fell by 0.3% versus a forecasted 0.1% rise. Core retail sales increased by 0.4% in July.

Initial jobless claims slipped from 218k to 213k versus a forecasted 226k, while the Philly Fed Manufacturing Index slid from 6.2 to 9.9. Economists forecast a fall to 2.8.

Later this morning, US industrial production and business inventory numbers are due but will likely have a muted impact on the USD/CAD pair.

In response to today’s stats, the markets priced in an 82% chance of a 75-basis point rate hike, up from 75% 24 hours ago. Bets for a percentage point Fed rate hike slid from 25% to 18%.

USD/CAD Price Action

At the time of writing, the USD/CAD was up 0.17% to 1.31886. Through the morning session, the USD/CAD fell to an early low of 1.31533 before rising to a post-stat high of 1.31918.

Technical Indicators

The USD/CAD will need to avoid the 1.3170 pivot to target the First Major Resistance Level (R1) at 1.3202 and the Wednesday high of 1.32062. However, following today’s stats, the USD/CAD would need a deterioration in market risk sentiment to support a return to 1.32.

In case of a risk-off-fueled extended rally, the USD/CAD should test the Second Major Resistance Level (R2) at 1.3237 and resistance at 1.3250. The Third Major Resistance Level (R3) sits at $1.3304.

A fall through the pivot would bring the First Major Support Level (S1) at $1.3135 into play. Barring a risk-on-fueled rally, the USD/CAD should avoid sub-1.31. The Second Major Support Level (S2) at 1.3103 should limit the downside. The Third Major Support Level (S3) sits at 1.3036.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal. This morning, the USD/CAD pair sat above the 50-day EMA, currently at 1.31008.

The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening on the 200-day EMA, delivering bullish signals for the USD/CAD pair. A hold above the 50-day EMA would support a run at R1 (1.3202)

However, a fallback through S1 (1.3135) would bring S2 (1.3103) and the 50-day EMA (1.30689) into view.

The US Session

Following this morning’s stats, US industrial production numbers for August are due with business inventories for July.

However, barring an unexpected fall in production, the numbers should have a muted impact on the dollar. Neither report is likely to influence the Fed’s policy decision.

There are no FOMC member speeches to consider, with the FOMC in its September blackout period (September 10-22). The lack of chatter will leave the markets in data-dependent mode.