The recent US Government shutdown has affected the overall growth of the US economy and the greenback. So, CAD managed to gain momentum in the meantime despite downbeat economic reports from Canada. Ahead of the FOMC policy meeting, Federal Funds Rate decision, and NFP report later this week, the pair is expected to trade with higher volatility.
According to flash estimates, the overall US economy lost about $11 billion. If everything settles down soon, $8 billion can be recovered very soon. The question is still open when that is going to happen. The US economy is likely to lose $3 billion or more as a fallout of the partial federal government shutdown due to President Donald Trump's demand for the border wall funding. The shutdown could hamper the US economic growth in 2019 by 0.02%, whereas 800,000 federal employees are left without payment for these days. Today CB Consumer Confidence report is going to be published which is expected to decrease to 125.0 from the previous figure of 128.1. On the other hand, a worse result may undermine USD ahead of FOMC and NFP this week.
On the CAD side, recently almost all the economic reports from Canada were published with worse-than-expected readings. For example, Retail Sales slumped to -0.9% from the previous value of 0.2% which was expected to be at -0.6% and Manufacturing Sales contracted to -1.4% from the previous value of -0.1%. Recently Canadian Finance Minister Bill Morneau stated that the economy and businesses are facing headwinds from the US-China Trade dispute as well as his country's own diplomatic tensions with China. This week on Thursday, CAD GDP, RMPI and IPPI reports are going to be published which will make higher impact on the upcoming CAD gains.
Meanwhile, both currencies in the pair are still quite indecisive ahead of the upcoming high impact economic reports. The US economy has been hurt by the partial government shutdown. So, any positive print in the upcoming economic reports from Canada may reinforce CAD in the short term, thus creating bearish momentum in the pair.
Now let us look at the technical chart. The price is trading inside the corrective range between 1.3200-1.3350, from where a breakout with a daily close will provide a directional movement in the pair. Though USD is currently the weaker currency in the pair, the pending macroeconomic reports, including the Fed's policy meeting and NFP, could trigger sudden spikes and change in a direction. As the price remains below 1.3350 area, the bearish pressure is expected to continue.
SUPPORT: 1.2850, 1.30, 1.3200
RESISTANCE: 1.3350, 1.3450, 1.3500
BIAS: BULLISH
MOMENTUM: VOLATILE
