The USD has turned bearish for about a week, as odds of future rate strong hikes diminish on lower economic growth, while prices keep increasing. Yesterday we saw another contraction in the US during Q2, which puts it officially in a recession, while prices keep increasing. As a result, USD/CAD has fallen below 1.30 again after making lower highs since last Friday.

USD/CAD H4 Chart – The 50 SMA Acting As Resistance

The trend has turned bearish for USD/CAD

Moving average shave turned into resistance, pushing this forex pair lower. The economy of Canada was expected to shrink in May, but today’s report showed that the economy fell flat, while June is forecasted to be positive. So, the situation is shifting in favour of the CAD.

US June Core PCE Price Index Inflation Report

• June core PCE 4.8% vs. 4.7% expected
• May core PCE was 4.7%
• Core ex food and energy month-to-month 0.6% vs. 0.5% estimate. Last month 0.3%
• PCE price index 1.0% vs 0.6% last month
• Price index YoY 6.8% vs the same month last year of 6.3%
• Prices for goods increased 1.5%
• Prices for services rose 0.6%
• Food prices increase 1%
• Energy prices increased by 7.5%

The data is hotter than expected and a negative for the rate expectations (all things being equal). Combined with personal income and consumption, the inflation numbers are not great.

Canadian May 2022 GDP Report from Statistics Canada

• Canada May GDP 0.0% vs -0.2% expected
• April GDP was +0.3%
• The service sector added +0.4%
• Goods producing sector added -1.0%
• 14 of 20 industrial sectors increased in May
• June advance GDP +0.1%
• The transportation and warehousing sector rose 1.9% in May, up for the fourth month in a row
• The manufacturing sector contracted 1.7% in May following seven months of growth

Canada continues to grind along. Expect ongoing contributions from auto manufacturing and energy extraction.

USD/CAD Live Chart