USD/CAD grinds lower below 1.2870 on a slow trading day

• The USD/CAD is subdued, though shy of the 1.2880s figure, after reaching a daily high above 1.2900 on Monday.
• The Canadian S&P Global Manufacturing PMI for June fell to its lowest reading in 17 months, missing estimations.
• The BoC Business Survey revealed that inflation expectations are skewed to the upside, above the 3% threshold, and will last longer than expected.
• USD/CAD Price Forecast: An inverted hammer in the daily chart opened the door for further losses.

The USD/CAD bounces off the 50-day EMA at 1.2830 and approaches the 1.2870 mark on Monday’s trading session, characterized by thin liquidity conditions as North American traders are on a long holiday in the observance of the US Independence day. At 1.2867, the USD/CAD is down 0.11% at the time of writing.

Sentiment is mixed, slightly tilted risk-on. In the FX complex, safe-haven peers remain heavy, except for the greenback, which is up against its major counterparties. The Canadian S&P Global Manufacturing PMI for June dropped to its lowest level in 17 months, to 54.6 from 56.8. According to Shreeya Patel, an S&P Global Market Intelligence economist, “Global supply issues and steep price pressures were at the heart of the issue and are expected to continue to disrupt the manufacturing economy this year.”

Later, the Bank of Canada (BoC) Business Outlook Survey shows concerns over near-term inflation is increasing and is expected to run at a higher for longer than the Q1 survey. According to the survey, businesses plan to raise wages, hire and retain workers and anticipate that inflation will exceed 3% on average for the next two years.

The USD/CAD edged lower, but as the North American session advanced, the major gained ground and reached a daily high at around 1.2902 before retracing to the 1.2870s amidst the lack of fresh impetus, which could threaten USD/CAD sellers around the 1.2900 mark.

In the meantime, high crude oil prices were of little help to the Loonie, whose imports amount to 10% of Canada’s GDP in a year. The Western Texas Intermediate (WTI’s) is up almost $2, up at $110.33 per barrel, putting a lid on upward prices on USD/CAD.

In the week ahead, the Canadian economic docket will feature the Balance of Trade and significant Employment Data. On the US front, data that could shed some light on the US economy will be revealed, led by  Factory Orders for May,  ISM Non-Manufacturing PMIs, Fed speakers, and the US Nonfarm Payrolls report.

USD/CAD Price Forecast: Technical outlook

The USD/CAD is upward biased in the medium term, but last Friday’s price action formed a huge inverted hammer in an uptrend, and the Relative Strength Index (RSI) accelerating downwards to the midline opened the door for further losses.

Therefore, the USD/CAD first support would be the 50-day EMA at 1.2830. Break below would expose 1.2800, and the 100-day EMA at 1.2737.

USD/CAD Key Technical Levels