USD has been the dominant currency in the pair while CAD has been not quite firm recently. As a result, the price was trading at near 1.3450 resistance area from where there is a greater probability of falling deeper again in the coming days.
The pullback of the US Dollar index was unexpected for USD Buyers. Recently, the index jumped to the highest level since November of 2018. Due to the general demand for risky assets and softening of the Fed's stance, USDX has been struggling for gains since the final quarter of 2018 to 1st quarter of 2019. But now, if US fundamental data supports USD, its index could touch the 100 area in coming days. The core retail sales show a solid growth from -0.2% to 1.2% while retail sales improved from -0.2% to 1.6%. Though the Building permits show a weaker than expected result, unemployment claims decreased from 197K to 192K. Core durable goods orders are expected to rebound from -0.1% to 0.2%. Besides, preliminary GDP is predicted to be unchanged. The Federal Reserve has expressed confidence about the current labor market. US GDP is expected to remain flat at 2.2% in Q2 of 2019.
On the CAD side, the Bank of Canada is likely to hold monetary policy steady for the rest of this year. The regulator signals the next hike in early 2020 resting on a knife's edge, a Reuters poll revealed. Canada's economy has taken a hit from the mandatory cut of oil production (its biggest export), a slowdown in the housing market, and wilting business sentiment due to worries about the US-China trade war. All economists polled said the BoC will hold rates at 1.75 percent at its meeting today and about 60 percent of them say they will stay steady through to the end of this year.
This week, the pair is set to trade with higher volatility ahead of flash US GDP on Friday and BOC Rate Statement today. Any positive report from Canada will cause price corrections and volatility. Otherwise, USD is expected to reinforce the impulsive bullish momentum which is going to push the price higher in the future.
Now let us look at the technical view. The price has been trading sideways in the range from 1.3300 to 1.3450 for over a month now. The pair is expected to drop lower towards 1.3300 area as the price is held by the strong resistance area between 1.3450 and 1.3500. As the price remains below 1.3500, the odds are that the price could sink deeper. Alternatively, a break above 1.3500 area with a daily close will push the price much higher in the future.
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