USD/CAD Return to 1.30 Hinged on Canada’s RMPIs and the Philly Fed

It is a quiet session ahead for the USD/CAD, with economic data from Canada limited to RMPI numbers for July. The Raw Materials Price Index (RMPI) jumped by 2.7% in June while economists forecast a 0.1% decline for July.

As a leading indicator of consumer inflation, weak figures would support the USD/CAD slow return to 1.30.

Ahead of the US opening bell, crude oil prices steadied, with WTI Crude up 1.26% to $89.22. WTI has seen heavy losses this week, weighed by the economic indicators from China and fears of a marked fall in demand as recession jitters resurface.

On Tuesday, inflation numbers from Canada delivered further USD/CAD support. The RMPI numbers could set the theme for the Loonie over the near term.

Philly Fed Manufacturing numbers and FOMC member chatter will need monitoring. Following Monday’s weak NY Empire State Manufacturing numbers for August, an unexpected slide in the Philly Fed Manufacturing Index would add to the market angst over the economic outlook.

There are no Bank of Canada speeches scheduled for the markets to consider today that could deliver a curveball.

USD/CAD Price Action

Ahead of the US session, the USD/CAD was down 0.14% to 1.28907.

Technical Indicators

The USD/CAD will need to move through the 1.2891 pivot to test the First Major Resistance Level (R1) at 1.2955. Market risk aversion driven by US economic indicators and a fall in crude oil prices would support a move through the Wednesday high of 1.29364.

In the event of another risk-off session, the Second Major Resistance Level (R2) at 1.3000 would likely come into play.

However, the USD/CAD fall through the pivot brings the First Major Support Level at 1.2845 and the Monday low of 1.28272 into view.

Barring impressive manufacturing data from the US and a further rise in crude oil prices, the USD/CAD should steer clear of sub-1.28 and the Second Major Support Level (S2) at $1.2782.

The Third Major Support Level (S3) sits at 1.2673.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal. At the time of writing, the USD/CAD pair stood above the 200-day EMA, currently at 1.28717.

The 50-day EMA converged on the 100-day EMA, with the 100-day EMA closing in on the 200-day EMA. Both were bullish signals for the USD/CAD pair.

A USD/CAD hold above the 200-day EMA and a bullish cross of the 50-day EMA through the 100-day EMA would support a run at R1 (1.2955) and a return to 1.30. However, a fall through the 200-day EMA (1.28717) would bring the 100-day EMA (1.28636) and the 50-day EMA (1.28614) into play alongside S1 (1.2845).

The US Session

Housing sector data, weekly jobless claims, and Philly Fed Manufacturing numbers for August are on the docket. Expect market interest in manufacturing and labor market figures as concerns over the US economic outlook linger.

Weak Philly Fed Manufacturing figures and a spike in jobless claims would support a DXY return to $107.

From the Fed, FOMC member chatter will need monitoring. The markets remain torn between a 50 and a 75-basis point rate hike in September.