The USD/CAD pair managed to sustain bearish momentum. The pair moved below 1.3200 area. Though the price was volatile, the preceding bearish trend was quite dominant. The pair was expected to drop but certain retrace or pullback may occur.
Market participants are focused on the Fed's decision on the key rate cut. This uncertainty puts pressure on the US dollar. US President Donald Trump pressed the Fed to reduce interest rates and considered candidates for two open board seats. Fed chief James Bullard has also made the case for lower rates, and at the central bank's most recent policy meeting earlier this month he dissented from the decision to leave rates unchanged. Recently Fed Chairman Jerome Powell defended the central bank's independence from President Donald Trump and financial markets. Both officials seem to be pushing for aggressive rate cuts.
Moreover, due to the trade wars, US consumer confidence tumbled to a 21-month low in June as households grew a bit more pessimistic about business and labor market conditions. US GDP report is going to be published on Friday. The reading is expected to be unchanged at 3.1%. Today, US Core Durable Goods Orders report is going to be unveiled. The figure is expected to increase to 0.1% from the previous value of 0.0%, Durable Goods Orders is expected to rise to 0.0% from the previous negative value of -2.1%. Additionally, Goods Trade Balance is expected to grow to -71.8B from the previous figure of -72.1B, and Prelim Wholesale Inventories is expected to drop to 0.6% from the previous value of 0.8%.
On the other hand, Canadian Retail Sales increased to 0.1%. National Bank of Canada's analyst Krishen Rangasamy points out that the depreciation of the Canadian dollar has been a factor behind the rise in inflation in Canada and that could lead to the Bank of Canada to consider the inflation overshoot for short-term. Canada's retail prices have outpaced those of the US in part due to the depreciation of the Canadian dollar, the latter making imported items more expensive. Recently CAD Wholesale Sales showed an increase to 1.7% from the previous value of 1.4% which was expected to tumble to 0.2%.
This week on Friday, CAD GDP report is going to be published. The reading is expected to rise to 0.2% from the previous value of 0.5%. If the forecast is correct, the Canadian dollar may lose momentum while the US dollar may add gains.
Now let us look at the technical view. The price has been correcting at the edge of the 1.3200 area while forming Bullish Divergence and showing further upward pressure. The current price location is also quite far from the Mean. Thus, it is expected to pullback towards 1.3200-1.3300 area in the coming days. Despite the preceding bearish trend, certain counter trend momentum is expected to be short-term.