The US dollar’s continual decline and Underperformance in the Forex market recently reflect on other currency pairs leveraged on the green paperback, as is the case for the USD/CAD currency pair.
USD/CAD is consolidating at the 1.2500 region, unable to field enough momentum to reverse from a nine-week long downward low of 1.2453 it plunged to on Thursday.
The continual decline of the US dollar despite record overall increase in the 2-year,10-year, and 30-year Treasury yields with each yield outperforming the other over the last year, the US dollar inflation concerns and increasing pessimism of investors on the fiat currency outlook has added to the pull back on the development of the green paperback.
USD leveraged currency pairs are on an overall low, with sellers selling in large numbers and investors being skeptical of price action as the market awaits the important Retail Sales and prelim UoM Consumer Sentiment releases.
US Retail Sales And Consumer Sentiment Index
There is yet hope for a fortune reversal for the currently underperforming US dollar in the Forex market as the widely referenced US Retail Sales economic indicator. The consumer sentiment index monthly update will be released shortly.
The US Retail Sales is a critical economic indicator that leverages the buying power of consumers in the country. It comprises sales of services and goods (durable and nondurable) in a specific period in the country.
The significance of this economic indicator that has ensured its continued relevance and utility is since over 70% of the United States gross domestic product (GDP) is made up of consumer spending in the country, ensuring that the retail index remains an all-time relevant indicator.
On the other hand, consumer sentiment is a close counterpart of the Retail index indicator that is used concurrently to judge price action. It is an economic indicator that measures the optimism level of consumers concerning their sovereign States’ finance and their sentiments about their economy.
It primarily consists of 50 tailored questions that target consumers’ assessments of their situation financially, their attitudes towards retail buying, and sentiments on their overall economic climate.
The US Census Bureau is in charge of the monthly publications of both indexes. The market is now looking forward to the reports in hopes that they will shed light on and possibly clear all uncertainties about the US dollar’s pessimistic future outlook in the market.
USD/CAD Remains Bullish Despite WTI Price Dump
Despite the Price Dump of the West Texas Intermediate (WTI) oil benchmark, the USD/CAD currency pair outperformed the consequent market-wide pullback of WTI’s dump. Crude oil prices have fallen from their previously increasing higher levels as oil demand falls in southern Asia for the first time in 20 years. Crude oil importation in China fell by over 5.4% in 2021 for the first time since 2001 as concerns about US intervention on crude oil price stabilization grew.
Technical analysis has revealed that the USD/CAD is currently gearing up for a bullish run as it retests prior bullish commitments leveraged on its 200-daily moving average (DMA) at 1.2501, evidenced by the short recapture at 1.2501 on Thursday after a week start sell-off influenced by the US dollar decline.
A sustained move below the 1.2501 price mark will quickly result in a price retest of the pair’s bi-monthly all-time low at the 1.2450 price region, of which further price drop will see price plunge towards 1.2400
The 14- day Relative Strength Index (RSI) is holding steady below the midline, indicating that a retest will be short-lived, meaning that should the currency pair gather enough momentum in the coming days, bulls could once again run to breach the 1.2550 psychological barrier.
If and when the 1.2550 barrier is breached, the next bullish target stands at a Wednesday high of 1.2579, attenuating a new advance path towards the 1.2600.