Photo by Michelle Spollen on Unsplash

The Canadian Dollar (CAD) slowed its pace of losses against the US Dollar (USD) on Friday, but still remains firmly on the low side, testing 18-week intraday lows before battling back against the tide of Greenback pressure to cap off a week of sustained losses.

Canadian Gross Domestic Product (GDP) growth rebounded in July, helping to provide some thin support for the Loonie on Friday, but market flows remain largely unchanged in the near-term. US Dollar weakness returned to markets after US Personal Consumption Expenditure Price Index (PCE) inflation came in around where markets expected it to, keeping broad-market sentiment focused on high odds of a follow-up Federal Reserve (Fed) interest rate cut in October. Despite a general weakening in Greenback flows, the Canadian Dollar is struggling to find its footing.

Daily digest market movers: Canadian Dollar pumps the brakes to limited success

• The Canadian Dollar is roughly flat against the US Dollar on Friday after briefly testing fresh 18-week lows.
• Canadian GDP growth accelerated to 0.2% MoM in July, flouting market forecasts for a 0.1% uptick from the previous month’s 0.2% contraction.
• US PCE inflation printed roughly in-line with expectations, but is still riding well north of the Fed’s 2% annual target.
• Despite stubborn inflation, market expectations for a second straight rate cut from the Fed in October remain pinned to the ceiling, with rate markets pricing in nearly 90% odds a follow-up 25 bps rate trim on October 25.
• Next week will be another US-heavy economic data docket as another Nonfarm Payrolls (NFP) jobs data dump looms ahead next Friday.

Canadian Dollar price forecast

USD/CAD has been grinding higher since mid-September, with a sharp acceleration over the past few sessions. The decisive breakout above both the 50-day and 200-day EMAs signals a shift in momentum toward the bulls. Importantly, the break above the 200-day EMA has been sustained with follow-through buying, suggesting market participants are willing to chase strength rather than fade it.

On the upside, the pair is now probing the 1.3950 zone, a level that has acted as a near-term cap in recent months. A clean daily close above here would open the door toward 1.4000 psychological resistance and potentially extend toward 1.4100 if momentum persists. On the downside, support is building at the former resistance area around 1.3880, which coincides with the 200-day EMA. As long as that zone holds, the broader bias tilts bullish.

USD/CAD daily chart

(Click on image to enlarge)

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