BoC might be pressured to cut interest rates soon.

The Canadian dollar weakened to 1.36 CAD per USD amid signs of a weakening Canadian labor market. The depreciation of the USD helped prevent a more significant decline in the CAD. A reduction in employment by over 1,400 positions is a crucial indicator that the Canadian economy is contracting and being clearly affected by high-interest rates. This slowdown in labor data may pressure the Bank of Canada to cut interest rates sooner.

Canada posted a trade deficit of CAD 1.93 billion in May, more than the market forecast of CAD 1.2 billion. This is the largest deficit in several months, primarily due to a 2.6% monthly drop in exports, which fell to CAD 62.4 billion, the lowest level since June 2021. Eight out of eleven product categories saw declines, mainly metals and non-metals, along with a continued drop in energy product exports. Meanwhile, imports decreased by 1.6% to CAD 64.4 billion, with a significant 27% increase in imports of metal and non-metal ores.

The Composite PMI stood at 47.5 in June, indicating clear contraction, driven by a sharp decline in service sector activity after expansion the previous month. Manufacturing activity contracted for the 14th consecutive month, leading to a slowdown in new orders for both sectors and reducing confidence to its lowest level in a year.

The Manufacturing PMI remained steady at 49.3 in June, marking the 14th consecutive month of contraction in manufacturing activity. Both output and new orders continued to decline due to weak domestic and international demand, resulting in a slight increase in inventories from reduced sales. Additionally, this has led to workforce reductions and hiring freezes to cut labor costs. Confidence in the manufacturing sector fell to the lowest point of the year, reflecting concerns about rising costs and unfavorable market conditions, despite some hope that new products might stimulate demand.

The yield on 10-year Canadian government bonds fell to 3.57%, following the decline in US bond yields amid rising expectations of a Federal Reserve rate cut, despite the ongoing economic slowdown in Canada. US economic data for June showed a sharp decline in service sector activity, along with a slowdown in inflation.

Techical analysis data (5H)

Resistance: 1.3646, 1.3651, 1.3659

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3623 - 1.3632 but cannot break the support at 1.3632, you may set a TP at approximately 1.3651 and SL at around 1.3618 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3646 - 1.3651, you may set a TP at approximately 1.3659 and SL at around 1.3623 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3646 - 1.3651 but cannot break the resistance at 1.3646, you may set a TP at approximately 1.3623 and SL at around 1.3659 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3623 - 1.3632, you may set a TP at approximately 1.3618 and SL at around 1.3651 or according to your acceptable risk.

Pivot point July 9, 2024 07:02 PM. GMT+7