The Canadian Dollar (CAD) is facing some pressure as it hasn’t received any help from FX commodity currencies or global stocks. Retail sales in Canada are expected to drop by 1.0% in May, matching the early decline from April. Seasonal trends for the CAD might become less favorable later this summer, partly due to rising equity market volatility. The USD/CAD pair has bounced back, suggesting a possible short-term low around the upper 1.35 zone. **Short Term Indicators Favor USD** Current short-term indicators are leaning toward the USD after a recent shift in range. However, the overall trends hint at a possible return to a downward movement for USD/CAD. Resistance for the USD is expected around the 1.3650/75 level. The EUR/USD remains bearish following the ECB’s choice to keep the Deposit Facility Rate at 2.00%. Gold prices are nearing $3,360 per ounce, supported by the US Dollar’s rebound and rising US Treasury yields. The GBP/USD pair has dropped to the mid-1.3500s, influenced by the Greenback’s recovery and a general risk-averse sentiment. Economic indicators, like S&P Global flash PMIs for July, show progress, indicating growth in the US economy, with stable interest rates from the Federal Reserve anticipated. **Future CAD Prospects** The Canadian dollar is expected to face challenges ahead. Recent data from Statistics Canada shows a 0.6% decline in retail sales for April. Although the preliminary estimate for May suggests a rebound, weakness in consumer spending and a soft job market could limit significant currency strength. Thus, we remain cautious about the loonie’s future. Seasonal patterns might soon be unfavorable for the CAD, as historical data indicates that August and September can be tough months. Increased equity market volatility during this time often leads to more investment in the safer US dollar. Derivative traders should prepare for this potential shift in market sentiment. The US dollar’s strength is supported by strong economic reports. The latest S&P Global Flash US Composite PMI reached a 26-month high of 54.6 in June, reinforcing the U.S. economic edge. This strong data allows the Federal Reserve to take its time regarding interest rate cuts, making the dollar more appealing. Gold prices are stabilizing around $2,320 per ounce, pressured by the strong US dollar. The stability of US Treasury yields, with the 10-year note above 4.2%, makes non-yielding assets less attractive for now. This trend highlights the dominance of the greenback over other currencies and commodities. Given these factors, traders should consider strategies that favor a rising USD/CAD exchange rate. Buying call options on the pair could provide upside exposure to further US dollar strength while limiting potential losses if the trend reverses. This seems like a smart way to position for a possible test of new highs above the 1.37 level. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now