Home Fundamental Comment USDCAD drops as strong dollar raises concerns

USDCAD drops as strong dollar raises concerns

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USD drops as industrial production raises concerns fxcommentThe USDCAD plunged on concerns a strong U.S. dollar would harm the U.S. economy after a report showing U.S. industrial production dropped more than forecast in May.

Output by U.S. manufacturers slipped a seasonally adjusted 0.2 percent, following a 0.5 percent fall in April. Analysts had predicted a 0.2 percent increase.

The reading reflected the negative impact of the strong dollar on the manufacturing sector, as it has cut profits of companies.

While President Barack Obama has denied reports citing his concern about the strength of the green currency and its impact on the economy, some analysts predict the Fed to deliver some dovish comments about the dollar and the U.S. economy on Wednesday.

The recent data has showed progress in the U.S. economy, but other data has raised suspicious that recovery is not strong to allow policymakers to raise interest rates.

Further strength to the dollar would continue to damp exports might prevent inflation from reaching its 2-percent target.

USDCAD

The 1-hour chart shows that the pair has resumed it drop since it faced selling pressure near the resistance line.

The closing below the support line depicted on the chart could trigger further losses in the pair driving it to 1.2280, where fall below the RSI 14 centerline supports the bearish direction.

Yet, it seems that the pair has found support from 38.2% Fibo level for the upside trend that began on June 10.

USDCAD drops as strong dollar raises concerns fxcomment

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Ahmed Mamdouh Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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