USD/CAD stabilizes after mixed US Retail Sales data, anticipates Fed decision

• USD/CAD Nears 1.3575 Amid Mixed US Retail Sales and Anticipation of Fed’s Rate Decision.
• High Oil Prices and Middle East Tensions Support the Canadian Dollar.
• Technical Analysis: USD/CAD Shows Potential Reversal in Downtrend as RSI Indicates Slowing Bearish Momentum.

The Canadian Dollar (CAD) is maintaining stability against the US Dollar (USD) this Tuesday, with the USD/CAD pair trading around 1.3575.

Uncertainty driven by mixed US retail sales data and escalating Middle East tensions has traders on edge as they await the Federal Reserve’s upcoming policy meeting.

Following a drop to an eight-month low, the focus is now on the Federal Open Market Committee (FOMC) decision and developments in the Persian Gulf region.

Despite strong oil prices bolstering the CAD, the influence of US economic data and monetary policy remains significant.

Retail Sales Offer Mixed Insights into Consumer Spending

US Retail Sales data released on Tuesday revealed a decline of 0.9% in May, more than the anticipated 0.7%, marking the largest decrease since early 2024. Excluding autos, sales dipped by 0.3%, suggesting a general slowdown in consumer spending.

Conversely, the control group component of the report, which excludes volatile items and contributes directly to GDP calculations, increased by 0.4%, rebounding from a -0.1% in April and indicating sustained core consumer strength.

This mixed data presents a complex scenario for the Federal Reserve, potentially supporting a pause in interest rate hikes while also highlighting underlying economic resilience.

The ongoing conflict between Israel and Iran poses risks to global oil supply security, particularly through the Strait of Hormuz.

As a commodity-linked currency, the Canadian Dollar benefits from higher oil prices, which could mitigate potential declines against the USD.

Traders will continue to watch oil price movements and Federal Reserve signals closely, which will likely influence USD/CAD dynamics through the week.

USD/CAD Technical Outlook

The USD/CAD pair is experiencing persistent selling pressure, now trading around 1.3580 and hovering just above crucial trendline support.

The currency pair is adhering to a descending channel, with key Simple Moving Averages (10-day at 1.3644, 20-day at 1.3713, and 50-day at 1.3819) all positioned above the current trading level.

Although it has tested the lower boundary of the channel near 1.3540, it has not yet broken through decisively.

A sustained move below this level could trigger a drop towards the low of November 2024 at 1.3419. Meanwhile, the Relative Strength Index (RSI) is at 29 and trending upwards, suggesting a potential slowdown in bearish momentum.

A stronger US Dollar could lead to a short-term consolidation or a rebound towards the 1.3640-1.3710 resistance area soon.

USD/CAD Daily Chart Overview