The USD/CAD pair has been corrective and volatile at the edge of the 1.3500 area for a few days. Now, it is likely to move higher with a break above the important psychological level with a daily close.
The US Consumer Confidence positive report supported the US currency. Consumer confidence report showed an increase in May as households grew more optimistic about the labor market, suggesting the economy remained on solid ground despite signs that activity was slowing after being temporarily boosted by exports and a build-up of inventories.
The trade war between US-China has worsened the economic development. Chinese Mobile Giant Huawei is currently facing US sanctions. The cut-off date for the Conference Board survey was on May 16. The U.S. raised existing tariffs on $200 billion in Chinese goods to 25% from 10% on May 10, prompting Beijing to retaliate with its own levies on American imports. Moreover, all 12 of the U.S. Federal Reserve's regional banks supported keeping steady the interest rate commercial banks are charged for emergency loans before the central bank's last policy meeting.
The figure of the Prelim GDP report is expected to drop to 3.1% from 3.2%. US Richmond Manufacturing Index report is going to be published today. The reading is expected to boost to 6 from 3.
Bank of Canada Governor Stephen Poloz pointed out that the interest rates remained unchanged on Wednesday. Today, the CAD Overnight Rate report is going to be released. The reading is expected to be unchanged at 1.75%. It's a reflection of an economy, only just emerging from a serious slowdown, that's still too fragile to cope with higher rates. Businesses are spooked by global trade uncertainty. Low oil prices and transportation constraints have hobbled the crucial energy sector. Though certain rumors are being heard about the rate cut by Bank of Canada but till now Bank of Canada has not shown any evidence to believe it yet.
Today, Canadian Government will formally present draft legislation to parliament to ratify a new North American trade pact. it is expected to press ahead with moves to ratify the United States-Mexico-Canada Agreement after the U.S. administration lifted tariffs on Canadian steel and aluminum exports. Additionally, the Bank of Canada's Rate Statement is expected to lead to further volatility in the currency pair today.
The Canadian dollar is likely to lose momentum against the US dollar.
Now let us look at the technical view. The price is currently residing at the edge of the 1.3500 area after a strong bullish pressure observed recently. Having resided inside the corrective range for a few days, the price has found strong support at the preceding upward trend line which is expected to carry the price further upward with a target towards 1.3600 area in the coming days. As the price remains above 1.3350 area with a daily close, the bullish bias is expected to continue.
