The Canadian Dollar (CAD) emerged as one of the strongest performers on Friday, appreciating to a fresh two-month low against the US Dollar (USD) near the 1.3860s level. This movement was closely linked to a weaker-than-expected US Retail Sales report, which weighed heavily on the Greenback across global markets. Notably, the CAD's rally began even before the US data release, but the disappointing figures accelerated the move [1].
US Retail Sales for July declined by 0.6%, significantly missing market expectations of a 0.1% gain and reversing from a 0.2% increase in the previous month. The Control Group, a key component feeding into GDP calculations, also fell by 0.4%, compared to a revised 0.4% gain in the prior period. These numbers signal a notable pullback in US consumer spending and represent one of the softer retail readings of the year [1].
Following the data release, the US Dollar Index (DXY) dropped sharply, nearing the 99.50s, as traders increasingly anticipated that the Federal Reserve would hold interest rates steady rather than pursue further hikes. This shift in expectations further undermined the USD, leaving the USD/CAD pair with little support [1].
From a technical perspective, USD/CAD traded at 1.3870, maintaining a bearish short-term outlook as it remained below both the 20-period Simple Moving Average (SMA) at 1.3925 and the 100-period SMA at 1.4019. The Relative Strength Index (RSI) hovered around 25, indicating oversold conditions, though the downside structure persisted. Immediate resistance levels were identified at 1.3884 and 1.3894, with further resistance at 1.3922 and 1.3925. On the downside, initial support was seen at 1.3864, with a sustained break below this level potentially leading to further weakness in the pair [1].
CONCLUSION
The Canadian Dollar's surge was driven by a sharp miss in US Retail Sales, which pressured the US Dollar and shifted market expectations toward a Federal Reserve rate pause. Technical indicators suggest the USD/CAD pair remains under bearish pressure, with further downside possible if support levels are breached.