Canadian Dollar gives lopsided Tuesday performance amid Canadian data drought

• The Canadian Dollar eased back on Tuesday, but the US Dollar fell faster.
• Canada remains data-light until Friday’s GDP print.
• Markets are hunkering down until Friday’s US PCE inflation figures.

The Canadian Dollar (CAD) traded with a broadly softer tone on Tuesday, easing back against the majority of its major currency peers, but still found room to move higher against the US Dollar (USD). The Greenback floundered across the board heading into the midweek, dipping into the red and helping to send USD/CAD into a third straight down day.

Canada remains mostly absent from the economic calendar this week until Friday’s Gross Domestic Product (GDP) update for the second quarter. Annualized Q2 GDP is expected to tick down to 1.6% from 1.7%, but markets are likely to be focused entirely on US Personal Consumption Expenditure – Price Index (PCE), which are due to print in the same release window.

Daily digest market movers

• Markets continue to sell the Greenback into the ground as rate cut expectations hold on the high side.
• CAD continues to struggle to find its own momentum and remains at the mercy of broader market flows.
• The Federal Reserve (Fed) pivoting into a dovish stance remains the talk of the town.
• According to the CME’s FedWatch Tool, rate markets are pricing into over 35% odds of a 50 bps rate trim on September 18, with the remainder expecting a quarter-point cut.
• Rate traders expect a total of 100 bps in cuts by the year’s end.

Canadian Dollar price forecast

Despite the Canadian Dollar’s (CAD) unconfident tone on Tuesday, a broadly weakening US Dollar has sent USD/CAD price action into the gutter, extending a decline below 1.3500 and testing six-month lows near 1.3450. The pair has traded into the red for all but four of the last 17 consecutive trading days, tumbling 3.5% peak-to-trough from early August’s peak bids just shy of 1.3950.

A one-sided bearish plunge in USD/CAD chart action has let bids slump directly through the 200-day Exponential Moving Average (EMA) at 1.3628. Sidelined bulls are running out of room to find a foothold before momentum breaks through the low end of early 2024’s congestion zone between 1.3600 and 1.3400.

USD/CAD daily chart