Canadian Businesses Adapt Well

The Canadian dollar has continued to depreciate since the beginning of the year due to the strengthening of the US dollar. One of the Fed policymakers has proposed at least one interest rate hike if inflation is not curbed as expected. Additionally, the increase in the Producer Price Index has raised concerns that inflation trends may not decline as anticipated. Meanwhile, Canada's economic data shows the adaptability of domestic businesses and continues to indicate robust activity.

Canada's current account deficit increased to CAD 5.4 billion in the first quarter of 2024, marking the seventh consecutive deficit. The primary cause was the decrease in the goods balance, which fell to CAD 1.1 billion, while the services deficit decreased to CAD 3.6 billion. Furthermore, data revealed that foreign investors have been purchasing a significant amount of Canadian bonds but have reduced their buying of stocks and short-term debt securities.

The Business Barometer in Canada, a long-term index reflecting the 12-month outlook for domestic performance, rose to 56.4 in May, indicating a more positive business outlook, mainly driven by growth in the manufacturing sector. Energy prices, raw material costs, and labor demand remained stable, preventing a significant increase in production costs.

Retail sales in Canada increased by 0.7% month-over-month in April, representing the fastest retail sales growth in a year. However, much of this pressure came from a more than 1.6% decline in electronics sales, while food and beverage retail sales continued to decline. This indicates a reduced consumer spending capacity due to last year's interest rate hikes and rising product prices.

The yield on 10-year Canadian government bonds rose above 3.76% in May, following the increase in US government bond yields. Expectations that the Bank of Canada will cut interest rates for the first time in June have diminished. The Bank of Canada continues to signal that interest rates might remain unchanged for a longer period due to ongoing inflationary pressures.

Techical analysis data (5H)

Resistance: 1.3647, 1.3653, 1.3663

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3621 - 1.3631 but cannot break the support at 1.3631, you may set a TP at approximately 1.3653 and SL at around 1.3614 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3647 - 1.3653, you may set a TP at approximately 1.3663 and SL at around 1.3621 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3647 - 1.3653 but cannot break the resistance at 1.3647, you may set a TP at approximately 1.3621 and SL at around 1.3663 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3621 - 1.3631, you may set a TP at approximately 1.3614 and SL at around 1.3653 or according to your acceptable risk.

Pivot point May 31, 2024 07:20 PM. GMT+7