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USD is now losing steam amid downbeat economic reports. CAD is asserting strength in light of the latest events. The pair is likely to trade with higher volatility where USD has a greater chance to win favor with investors.
Recently the US FED unveiled a shift in stance on the balance sheet that aroused criticism from some media sources. The Federal Reserve is currently thinking of stopping the unwind of $4 trillion balance sheet later this year that is strongly disliked by market watchers as they think it will be a terrible mistake. According to the FED, balance sheet reduction is going on for a year and it has not made a significant impact on the economy and financial markets yet, though the economy is expected to benefit from normalization of the balance sheet. Additionally, JP Morgan recently downgraded US Q1 GDP growth outlook to 1.5% from the previous forecast of 1.75%. There are several reasons, but the dongraded forecast is clearly leading the market to indecision and volatility.
Recently US Core Durable Goods Orders report was published with a minor increase to 0.1% from the previous value of -0.4% but it failed to meet the expected value of 0.3% and Philly FED Manufacturing Index was published with a decrease to -4.1 from the previous figure of 17.0 which was expected to be at 14.1. Another market moving event today is FED's Monetary Policy report. Besides, FOMC Members Williams and Clarida are due to speak later in the global trading day. These events are likely to inject volatility in the market.
On the other hand, recently Bank of Canada's Governor Stephen Poloz spoke with a dovish tone which affected the market sentiment. Earlier, CAD was gaining favor with investors. Poloz signaled there is no rush to increase the interest rate like in the US. However, the regulator is sure to tighten monetary policy if the situation requires a rate hike. The Bank of Canada believes that they are at the peak of a tightening cycle and the ongoing economic slowdown is temporary.
Recently Canada's ADP Non-Farm Employment Change report was published with an increase to 35.4k from the previous negative figure of -20.9k and Wholesale Sales also showed an increase to 0.3% from the previous value of -1.1% which was expected to be at -0.2%. Today Canada's Core Retail Sales report is going to be published which is expected to increase marginally to -0.5% from the previous value of -0.6% and Retail Sales is expected to increase to 0.0% from the previous value of -0.9%.
Meanwhile, CAD finds support from optimistic expectations of the upcoming economic reports. The pair is expected to continue trading under of the bearish pressure in the coming days.
Now let us look at the technical view. The price is currently being held by the dynamic level of 20 EMA as resistance after an impulsive Engulfing bullish pressure with a daily close yesterday. As of the preceding trend i.e. bearish, the price is expected to push lower with an impulsive pressure if a daily close below 1.3200 is observed in the coming days. As the price remains below 1.3350 area with a daily close, the bearish bias is expected to continue in this pair.
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