Insights 
VT 
USD/CAD is trading near 1.3575 as markets evaluate mixed US Retail Sales data ahead of the Federal Reserve’s rate decision. Elevated Oil prices and geopolitical tensions in the Middle East are providing some support for the Canadian Dollar.
The pair is range-bound, moving sideways, with traders focused on the Federal Open Market Committee’s upcoming decision. The recent Retail Sales data shows a 0.9% decline in May, missing expectations, while sales excluding autos fell by 0.3%.
Monetary Policy Implications
However, the control group, which impacts GDP, increased by 0.4%, recovering from April’s -0.1%. This mixed data offers varied implications for future monetary policy.
The Israeli-Iranian conflict threatens the Strait of Hormuz, impacting global Oil prices and potentially supporting the Canadian Dollar. Traders will watch Oil price movements and Federal Reserve signals in the near term.
USD/CAD faces selling pressure near 1.3580, testing key support levels. Technical indicators such as the Relative Strength Index suggest momentum may be slowing, with potential for short-term consolidation.
The US Dollar is the most traded currency globally, accounting for 88% of foreign exchange turnover. The Federal Reserve’s decisions on interest rates significantly influence the US Dollar’s value, with quantitative easing typically weakening it.
Traders Anticipation
As USD/CAD hovers around the 1.3575 mark, what we see unfolding is a cautious dance between economic signals and geopolitical weight. The recent US Retail Sales figures were uneven, and while headline sales showed an unexpected drop, the control group—a core component for GDP forecasts—posted modest strength. This divergence puts traders in a holding pattern, anticipating the Federal Reserve’s stance with more intensity than usual.
We interpret the 0.4% rise in the control group as a possible buffer against a wider economic slowdown, yet it doesn’t fully counter confidence concerns raised by the broader 0.9% fall. That means, for positioning in the short term, any assumptions around monetary tightening should be tempered. Powell and colleagues have consistently tied future rate paths to the strength of consumer activity, and this data set offers just enough ambiguity to stall strong directional moves for now.
In parallel, strength in the Canadian Dollar draws partial support from higher Oil prices. With the Middle East conflict introducing new uncertainties, particularly near the Strait of Hormuz, energy markets could remain tense. Brent and WTI hold above key thresholds partly on speculative fears of supply disruption. From our perspective, this adds resilience to CAD, even if broader risk sentiment wavers.
Technically, the pair has failed to decisively clear above 1.3580 multiple times. Sellers seem to emerge firmly at these levels. Indicators such as RSI we observe are easing back, suggesting buying appetite is weakening. This supports the idea that the cross might consolidate further, or even tilt lower if upcoming US data disappoints or if Oil prices creep higher.
For those with macro exposure, close tracking of Fed communications will be paramount. Every speech, press briefing, or policy dot-plot now wields influence. FOMC members appear divided, and incoming inflation and labour figures could tip internal debate one way or the other. In the interim, positioning should be light unless new data shifts expectations materially.
We must also remember that with the US Dollar being involved in nearly 90% of all FX trades, even marginal shifts in interest rate assumptions tend to amplify volatility. That has the effect of drawing in speculative interest, which may exaggerate otherwise muted moves.
Near-term setups should account not only for Oil and central bank expectations but also technical levels like 1.3530 and 1.3615. Trading the range, not chasing breaks, has rewarded patience over urgency recently. That dynamic may remain in place until a decisive macro impulse emerges.
