- The US dollar fell after a 3.04% rise in the trade deficit on international goods and services.
- FOMC maintained the US funds rate at 0-025%, with the labor market playing a crucial role in a future review.
- Canada raised its June 2021 CPI by 3.1% (YoY), a decrease of 0.5% from May 2021 when it scored +3.6%.
The USDCAD pair dropped 0.54% as of 3:17 pm GMT on July 28, 2021, from the previous day’s close. At midnight, the pair was still down 0.30%, with the Canadian dollar gaining 0.18% against the euro and 0.29% against the Australian dollar. The US dollar took a hit after America reported a 3.04% rise in the trade deficit on international goods and services.
May 2021 saw imports grow against exports, with the deficit rising to $71.2 billion from April’s $69.1 billion. Further, the deficit increased by 3.5% for advanced international trade, from $88.2 billion in May 2021 to $91.2 billion in June 2021.
Wholesale inventories (advance) also grew 0.8% from $709.7 billion in May 2021 to $715.0 billion.
The FOMC, in its 2-day meeting ending on July 28, 2021, resolved to leave interest rates constant at 0-0.25%. It also voted to maintain the monthly $120 billion bond-purchase program until economic recovery steadies. However, Chairperson Jerome Powell reiterated that the labor market would guide the upward review of the funds rate.
According to the US Labor Department, approximately 9.2 million job openings were announced in May 2021, creating space for businesses to increase employment. However, in June 2021, the unemployed population reached 9.5 million people, indicating an unaccounted gap for May 2021.
The US awaits continuous jobless claims data later on July 29, 2021, with the event expected to affect the US dollar. It previously stood at 3,236,000, with a consensus forecast looking at a drop to 3,196,000.
Goldman Sachs downgraded its forecast of the US economy in the three months leading to September 2021. According to the bank, annualized economic growth was set at 8.5% between July 2021 and September 2021 but later lowered to 5%. This decrease resulted from the surging Delta variant with the rate of new cases past 50%.
Goldman Sachs put its full-year growth forecast to 6.6% in 2021, with the expansion trend moving in the range of 1.5% to 2%. The inflation exceeded the Fed’s target at 2% when it rose to 2.6% as early as March 2021. By June 2021, the CPI stood at 5.4%.
June 2021 saw Canada raise its CPI by 3.1% (YoY), a decrease of 0.5% from May 2021 when it scored 3.6%. Excluding the price of gasoline, the CPI grew 2,2% (YoY), with the monthly inflation at 0.3%.
Annual CPI change in Canada (excluding gasoline)
Prices of gasoline gained 10.5% (MoM) and 32.5% (YoY) in June 2021, and 43.4% in May 2021 (YoY). The difference was attributed to the base-year effect and the slow increase in price from June 2020, when gasoline prices were in recovery.
There was also increased demand for groceries and household essentials, with Canadian retailers busking in increased revenue in Q2 2021. Loblaw Cos Ltd raised its revenue by 4.61% from C$11.96 billion ($9.52 billion) in Q2 2020 to C$12.49 billion ($9.96 billion) in Q2 2021.
The USDCAD pair hit resistance at 1.2842. On July 21, 2021, it began a throwback when prices fell to 1.2730. We expect the price decline to continue, as it is moving below the 9-day EMA at 1.2553.
There is a rising selling volume with the RSI at 50.80, heading towards the neutral zone away from the overbought area. We could still see the price move up, especially after the release of jobless claims data.