USD/CAD finds support above 1.2820, heads for a weekly loss

• SD/CAD bounces from weekly lows back to 1.2870.
• Data from Canada surpass expectations, while in US disappoints.
• Attentions turn to FOMC meeting next week.

The USD/CAD is about to the week hovering around 1.2870 after rebounding from the 1.2820. Still the US dollar is about to end the week on a negative tone ahead of the FOMC meeting.

Economic data

The greenback tumbled after the release of the S&P Global PMI report that showed an unexpected contraction in the service sector in July according to preliminary data. The figures boosted further Treasuries and weighed on the US dollar. Attention now turns to next week’s FOMC meeting.

In Canada, data showed retail sales rose above market consensus in May with an increase of 2.2% and the preliminary estimate for June point to a gain of 0.3%. Although the numbers did not help the loonie that pulled back as stocks in Wall Street dropped further.

Key support holds

The USD/CAD rebounded after approaching the critical support area of 1.2820 and even recovered levels above the other relevant support of 1.2850, leaving the pair back into the previous range.

On a weekly basis, USD/CAD is about to end the week with losses after being unable to break the 1.3020 resistance. The wide range between 1.2850 and 1.3020 still prevails.

“The CAD has rebounded over the past week resulting in USD/CAD dropping back below the 1.2900 supported by the rebound in global equity markets. USD/CAD has had one of the strongest correlations with global equity market performance amongst G10 FX pairs. At the current juncture we view this equity market rebound as most likely a bear market rebound. As a result, the correction lower for USD/CAD should prove limited and short-lived”, consider analysts at MUFG Bank.

Technical levels