Will the US Inflation Data Drive a Breakout for USDCAD?Macro approach:
- USDCAD edged higher this week amid softer Canadian labor data, boosting BoC cut odds and pre‑CPI caution that kept the USD supported as traders eyed key US inflation prints.
- Canada shed 40.8k jobs in Jul while unemployment held at 6.9%, reinforcing expectations for a 17 Sep BoC cut and pressuring the loonie.
With Canada's calendar light, focus shifted to the US, where Jul CPI/PPI and Retail Sales are set to steer Fed cut probabilities that sit near 85–90% for Sep, anchoring USD tone into the data.
- In short, US inflation and activity data could drive USDCAD direction, while oil's resilience may cushion CAD. A softer US CPI/PPI may weigh on USD and support CAD, but it is limited (Oil trend and Sep rate cut), whereas sticky prints could extend USD firmness into the week.
Technical approach:
- USDCAD formed a Triple-Bottom pattern and broke the descending channel to make a swing high at around 1.3878. The price retraced and retested the support at around 1.3755 and bounced to close around EMA78. The price is captured within a tight trading range of 1.3755-1.3850, awaiting an apparent breakout to determine the trend.
- If USDCAD closes above both EMAs and the resistance at 1.3850, the price may retest May's resistance area at around 1.4000.
- On the contrary, closing below the support at 1.3755 and the ascending channel may prompt a correction to retest the key support at 1.3567.
PS: I also provide a quick view on DXY regarding US CPI data today via Wall Street Journal: www.wsj.com
Analysis by: Dat Tong, Senior Financial Markets Strategist at Exness
