Trading idea for USD/CAD on July 10, 2024
During Wednesday's Asian session, USD/CAD shows slight fluctuations, consolidating around the 1.3630 mark. For the third day in a row, the volatility of currency pairs remains weak as traders await the release of inflation data in the United States.
The market continues to evaluate possible changes in the monetary policy of the US Federal Reserve. The probability that the Federal Reserve System (Fed) will cut the interest rate by 25 basis points in September has been steadily increasing over the past two weeks. This is due to the release of weak macroeconomic data from the United States. It recently became known that the ISM services PMI index was in a recession zone in June, and the unemployment rate reached 4.1% in the same period, which is the highest since 2021. The inflation data also indicate a continuation of the disinflationary trend. The Fed's main inflation indicator, the Personal Consumption Price Index (PCE), fell to 2.6% last month, and the consumer price index dropped to 3.3% in May. The June inflation data, which will be released tomorrow, may play a decisive role for the Fed in easing monetary policy..
Despite the weak statistics from the United States, the economic situation in Canada looks even worse. On Friday, the Canadian employment report was published, showing that the unemployment rate in Canada rose to 6.4% against the forecast of 6.3%. The number of jobs in Canada decreased by 1.4 thousand last month, while analysts expected an increase of 22.5 thousand. High interest rates in Canada continue to put pressure on the economy, limiting the ability of companies to obtain loans. This increases the likelihood that after the June rate cut to 4.75%, the Bank of Canada may agree on additional monetary policy easing by the end of summer. Under these conditions, the Canadian dollar looks more vulnerable compared to the American dollar, which may contribute to the further growth of the USD/CAD pair above 1.3700.
- Buy Stop at 1.3660
- target 1.3800
- stop loss 1.3600.