• Canada’s new Finance Minister, Dominic Leblanc, took office, restoring political calm.

• The US economy grew by 3.1% in the fourth quarter.

• US jobless claims dropped more than expected last week.

The USD/CAD price analysis suggests political calm in Canada, which has given the loonie some strength against the shining dollar. Meanwhile, market participants eagerly await retail sales figures from Canada that will continue shaping the outlook for Bank of Canada rate cuts. 

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The loonie weakened earlier in the week when Canada’s Finance Minister resigned. The move created political uncertainty for the already struggling economy. However, calm was restored when the new Finance Minister, Dominic Leblanc, took office.

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Nevertheless, the Canadian dollar remains fragile due to the US dollar’s recent rally. The greenback strengthened after the Fed projected only 50-bps of rate cuts in the coming year. This outlook means that interest rates in the US will remain at restrictive levels for longer. Moreover, it would create a bigger rate gap between the US and Canada since the Bank of Canada is lowering rates aggressively. 

Elsewhere, data from the previous session revealed that the US economy grew by 3.1% in the fourth quarter, bigger than the forecast of a 2.8% expansion. The report continued the trend of upbeat data contributing to the Fed’s new cautious outlook. At the same time, jobless claims dropped more than expected, indicating tight labor market conditions.

Market participants will now watch the core PCE figures for more clues on future Fed moves. A bigger-than-expected number will support the dollar. Meanwhile, downbeat figures will give the loonie more relief.

USD/CAD key events today

• Canada core retail sales m/m
• Canada retail sales m/m
• US core PCE price index m/m

USD/CAD technical price analysis: Uptrend pauses for a brief retreat

On the technical side, the USD/CAD price is retreating after making a new high near the 1.4450 key level. However, despite the retreat, the bullish bias remains strong, with the price well above the 30-SMA and the RSI in bullish territory. 

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The bullish trend has developed steadily, with bulls making new highs and breaking above key resistance levels. Given the strong bullish bias, the uptrend might continue. Therefore, the retreat might pause at the 30-SMA support, where bulls will take over. If the price bounces higher, it will retest the 1.4450 resistance. A break above would make a higher high, continuing the uptrend.

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