USDCAD: USD firms against CAD, May 23, 2019

The USD/CAD pair has been consolidating in the corrective range from 1.3350 to 1.3500 for a few days now with a preceding bullish trend.

The minutes of the recent US Fed's meeting turned out to be quite mixed. However, it provided support for the American currency. The US Federal Reserve officials at the meeting agreed that their current patient approach to setting monetary policy could remain in place for a certain period where policymaker see little need to change rates in either direction. By controlling short-term rates, the Fed hopes to influence the broader economy to maximize employment and keep inflation near its target. Recent weak inflation was viewed by many participants as to be transitory, while risks to financial markets and the global economy had appeared to ease – a judgment rendered before the Trump administration imposed higher tariffs on Chinese goods and took other steps that intensified trade tensions.

The Federal Reserve may consider tweaking how much it pays mortgage agencies, money market funds and other non-banks in certain Treasury-backed transactions. The US house prices will rise this year by less than was predicted just three months ago, despite the Federal Reserve wiping out the prospect of future interest rate rises and recent market speculation about a cut. While property market experts said a lack of supply of affordable new homes is likely to persist and so house price rises will outpace overall inflation. The US economic growth beat expectations in the first quarter but has since started to show signs of a slowdown. Existing home sales, which make up for about 90% of all home sales in the United States, slipped in April for the second straight month.

Today's US unemployment claims report is expected to show an increase to 215k from the previous figure of 212k, the new home sales data is anticipated to drop to 678k from 692k, the flash manufacturing PMI is forecast to rise to 53.0 from the previous level of 52.6, while the flash services PMI is to inch up to 53.6 from 53.0.

On the CAD side, the lift of tariffs on the Canadian steel by the US in order to prevent the Chinese steel from entering the US market will help to boost the Canadian economy in the coming days. According to foreign minister Chrystia Freeland, Canada will move quickly to ratify the new North American trade pact. Despite the breakthrough on tariffs and the USMCA agreement last year, Canada was still worried about US protectionism. Recently, Canada's retail sales report indicated an increase to 1.1% from the previous value of 1.0%, while the reading was expected to lower to 0.8%, and the core retail sales grew significantly to 1.7% from 0.7%, while experts anticipated it to be at 0.8%.

The positive retail sales data provided support for the loonie. However, it could not sustain it further as the FOMC meeting had its cut of the pie. The US dollar is likely to remain a dominating currency in the pair for now.

Now, let us look at the technical view. The price has recently bounced from the 1.3350 support area and moved upwards. It formed a bearish rejection pattern with a daily close inside the corrective range between 1.3350 and 1.3500. As for the preceding trend, the pair is expected to rise as far as it remains above the 1.3350 area with a daily close targeting 1.3500 and later the 1.3600 resistance area in the coming days.

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