USD/CAD Price Forecast: Eyes on $1.35 Amid Oil Dip & Retail Data

Despite the downbeat US retail sales data, the USD/CAD currency pair maintained its upward rally and remained well-behaved around 1.3480. However, this upward trend can be attributed to the renewed strength of the US dollar.

Despite US retail sales decreasing by 0.8% MoM in January against the expected decline of 0.1%, the broad-based US dollar has been gaining traction amid risk-off market sentiment, which tends to underpin safe-haven assets like the US dollar.

Furthermore, the sharp decline in crude oil prices was another key factor that kept the USD/CAD currency pair higher as Canada heavily relies on oil exports, boosting USD/CAD.

Positive Factors Supporting USD/CAD Pair

Despite the disappointing US retail sales data released on Thursday, the US dollar gained support from the risk-off sentiment market, which helped the USD/CAD pair maintain its bid. On the data front, retail sales for January saw a 0.8% decline, far below the expected 0.1% drop and the previous month’s 0.4% increase.

Furthermore, Retail Sales Control Group dropped by 0.4%, sharply contrasting the prior 0.6% rise. Despite this, the US dollar found some support from US Initial Jobless Claims, which reported 212,000 unemployment claims for the week ending February 9, lower than the expected 220,000.

Hence, it can be considered positive news for the USD/CAD pair because, despite the disappointing US Retail Sales data, the US dollar found support from other factors like initial jobless claims, aiding its strength against the Canadian dollar.

Impact of Declining Crude Oil Prices on USD/CAD Pair

The decline in crude oil prices has also weakened the Canadian dollar, which was another key factor that kept the USD/CAD pair higher. Canada, being the largest oil exporter to the US, feels the pressure when oil prices drop.

However, the drop in West Texas Intermediate (WTI) oil prices came after a larger-than-expected increase in US crude oil stockpiles, raising concerns about demand in the US. Meanwhile, the market noted seasonally adjusted housing starts (YoY) at 223.6K in January, below the expected 235K and the prior 248.9 K.

Additionally, manufacturing sales fell by 0.7% month-over-month in December, reversing the previous 1.5% increase. Therefore, the lower-than-expected housing starts and decreasing manufacturing sales could undermine the Canadian dollar, which typically strengthens the USD/CAD pair.

USD/CAD Price Forecast: Technical Outlook

The USD/CAD pair has exhibited resilience, ascending modestly by 0.13% to trade at 1.34844, indicating a bullish inclination in the market. The currency pair is comfortably above the pivot point of $1.34608, suggesting potential for further upward movement.

Key resistance levels are identified at $1.35069, $1.35435, and $1.35855, marking critical junctures for the pair’s trajectory.

Conversely, support levels at $1.34141, $1.33670, and $1.33330 offer safety nets ready to counter any downward shifts. The Relative Strength Index (RSI) at 43 hints at a growing buying interest, albeit without entering the overbought zone.

The 50-day Exponential Moving Average (EMA) at 1.34921 bolsters the bullish stance, reinforcing the upward channel’s support.