USD/CAD near multi-month low following economic data from the US

• USD/CAD targets November 2022 lows at 1.3260.
• US Retail Sales data came in strong, and Jobless Claims in the first week of June picked up.
• Rising Oil prices and positive market sentiment support the CAD.

In Thursday’s session, the USD/CAD dropped more than 60 pips towards the 1.3245 level amid US Dollar weakness. In that sense, US bond yields are declining while Wall Street indexes trade with gains. On the other hand, amid the positive market sentiment and rising Oil prices, the CAD gained traction

US Yields decline following Jobless Claims and Retail Sales data

The US Census Bureau confirmed that Retail Sales in the US expanded by 0.3% vs the 0.1% contraction expected, while Jobless Claims in the week that ended in June 9 came in at 262K vs the 249K expected – the same as the previous weekly reading of 262k. It's worth noticing that US Federal Reserve (Fed) Chairman Jerome Powell noted at Wednesday’s press conference that the labor market in the US remains robust, so signs of unemployment rising make a dovish stance by the Fed more likely.

As a reaction, the US bond yields have weakened across the curve. The 10-year bond yield fell to 3.73%, while the 2-year yield sits at 4.65% and the 5-year yields 3.93% with a 2.03% drop, respectively. In addition, as stocks and bond yields tend to be negatively correlated, the expectations of a less aggressive Fed made the major Wall Street indexes rise with the S&P 500 (SPX) rising more than 0.40% standing at highs since April 2022.

Moreover, the positive market sentiment made Oil prices rise. The Western Texas Intermediate (WTI) rose more than 1% to the $69.80 area benefiting the CAD as Canada is a world-leading oil exporter.

USD/CAD Levels to watch

According to the daily chart, the USD/CAD holds a bearish outlook for the short term as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) both suggest that the sellers are in control while the pair trades below its main moving averages. However, both indicators are near oversold conditions suggesting an upwards correction could come into play.

If USD/CAD manages to move higher, the next resistances to watch are at the 1.3250 zone, followed by the 1.3300 area and the psychological mark at 1.3330. On the other hand, if the pair continues to lose ground, immediate support levels are seen at the November 2022 low at 1.3225, followed by the 1.3200 area.

USD/CAD Daily chart