The USD/CAD pair remains steady, trading near 1.3575 as markets digest mixed US Retail Sales data and anticipate Wednesday’s Federal Reserve rate decision. Elevated oil prices and geopolitical risks in the Middle East are limiting losses for the Canadian Dollar (CAD). After falling to an eight-month low on Monday, the pair has struggled to find direction, shifting market focus to the upcoming Federal Open Market Committee (FOMC) meeting.
Mixed signals from the latest US Retail Sales and escalating tensions in the Middle East are keeping traders cautious. The Canadian Dollar is holding its ground against the US Dollar, supported by its commodity link to oil prices. Recent US data and pending monetary policy decisions are taking center stage.
US Retail Sales for May presented a mixed picture. Headline figures declined by 0.9%, missing market expectations of a 0.7% decline, and marking the steepest drop since early 2024. Sales excluding autos also fell by 0.3%, indicating broad-based consumer activity softness.
However, the control group, which strips out volatile categories and feeds into Gross Domestic Product (GDP) calculations, rose by 0.4%, rebounding from April’s -0.1%.
Markets await Fed rate decision
The mixed Retail Sales data strengthens the argument for keeping interest rates steady, while the firm control group suggests economic resilience, reducing the urgency for rate cuts.
The intensifying Israel-Iran conflict threatens the security of the Strait of Hormuz, a critical chokepoint for global oil supply. Given the CAD’s commodity-currency status, elevated oil prices may help limit its downside against the USD. Traders will be closely monitoring oil price fluctuations tied to Middle East developments and signals from the Fed on Wednesday.
These factors are expected to shape the path of USD/CAD into the latter half of the week. USD/CAD remains under sustained selling pressure, trading near 1.3580 and holding just above key trendline support. The pair has respected the boundaries of a descending channel, with the 10-day (1.3644), 20-day (1.3713), and 50-day (1.3819) Simple Moving Averages (SMA) sitting above the current level.
A close below the lower bound of the channel near 1.3540 could open the door toward the November 2024 low of 1.3419. Meanwhile, the Relative Strength Index (RSI) hovers at 29, indicating that bullish momentum may be waning. If the US Dollar strengthens, this could lead to short-term consolidation or a technical rebound toward resistance at 1.3640–1.3710.