USD/CAD Price Forecast: A downside move to near 1.3400 seems warranted
- USD/CAD wobbles near an almost three-week low around 1.3600 ahead of flash US PMI and Canadian Retail Sales data.
- Market sentiment improves on hopes that the US and the EU are close to finalize a tariff deal.
- USD/CAD trades below the 20-day EMA, signaling a downside trend.
The USD/CAD pair clings to losses near an almost three-week low around 1.3600 during the Asian trading session on Thursday. The Loonie pair faces selling pressure as the safe-haven demand of the US Dollar (USD) has diminished amid hopes that the United States (US) and the European Union (EU) will strike a trade agreement ahead of the August 1 tariff deadline.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, seems vulnerable near the two-week low around 97.00.
Investors turn increasingly confident that economies on both sides of the Atlantic could finalize an agreement, which would be similar to the tariff deal took place between US and Japan on Tuesday. This means that Washington has offered a reduction in the baseline tariff and automobile levy to 15%.
Meanwhile, investors await the flash US S&P Global PMI data for July, which will be published at 13:45 GMT.
In Canada, investors will focus on the monthly Retail Sales data for May, which will be published at 12:30 GMT. The Retail Sales data is expected to have declined by 1.1% after a nominal growth of 0.3% in April.
USD/CAD exhibits volatility contraction around 1.3600, oscillating inside Wednesday’s trading range. The near-term trend of the pair remains bearish as the 20-day Exponential Moving Average (EMA) slopes downwards to near 1.3666.
The 14-day Relative Strength Index (RSI) slides to near 40.00. A fresh downside momentum would trigger if the RSI falls below that level.
The asset could slide towards the psychological level of 1.3500 and the September 25 low of 1.3420 if it breaks below the June 16 low of 1.3540.
On the contrary, an upside move by the pair above the May 29 high of 1.3820 would open the door towards the May 21 high of 1.3920, followed by the May 15 high of 1.4000.
USD/CAD daily chart
