USD/CAD remains limited by 1.3250, Loonie not impressed by Canadian data
- Canadian GDP expanded 0.3% in May.
- US data shows core consumer inflation slowing down.
- USD/CAD moves sideways on Friday, remaining near the levels it had a week ago.
The USD/CAD dropped to the 1.3200 area following US and Canadian economic data but then rebounded, approaching the key resistance area at 1.3250. The pair hit weekly highs at 1.3248 but failed to break higher as it continues to move sideways, and is about to end the week unchanged.
Sideways despite data
Data released on Friday showed that the Canadian GDP expanded 0.3% in May, in line with consensus. The Loonie rose after the data but then pulled back, with USD/CAD moving sideways. “Several temporary factors distorted May’s GDP data. While the end of the federal employees’ strike boosted the economy, forest fires resulted in a contraction of the energy sector. Excluding these two factors, the Canadian economy grew 0.4%, better than the headline figure (0.3%). But this rebound may be short-lived,” explained analysts at the National Bank of Canada.
Regarding US data, the annual Core Personal Consumption Expenditure Index fell from 4.6% to 4.1% in June, weighing on the US Dollar. Personal Income rose 0.3%, below the 0.5% of market consensus, and Personal Spending rose by 0.5% above the expected 0.4%. A different report showed that the Employment Cost Index during the second quarter rose 1%, less than the 1.1% of market forecast.
The US Dollar pulled back after the data that pointed to softer inflation. The US Dollar Index is falling 0.20% on Friday, erasing some of Thursday’s gains. On a weekly basis, the DXY is up, headed toward the second consecutive weekly gain. Next week, the US and Canada will release employment reports.
USD/CAD still under 1.3250
The USD/CAD is moving with a slight bullish bias but remains capped by the 1.3250 area. A break higher could lead to an acceleration, with the next resistance seen at 1.3290. The key support stands at 1.3150; before that level, an interim support emerges at 1.3190.