USD/CAD Drops to 1.3810 Ahead of US PCE Inflation and Canadian GDP Reports

USD/CAD Falls to 1.3810 Ahead of US PCE Inflation and Canadian GDP Reports

The USD/CAD currency pair dipped to around 1.3810 in early Asian trading on Friday, pressured by weak U.S. economic data and uncertainty around U.S. trade policy. Traders are closely watching the upcoming U.S. PCE Price Index and Canadian GDP data, which are expected to influence short-term price movements.

Soft U.S. Economic Data Weakens the Greenback

The U.S. Dollar (USD) came under pressure following a disappointing Initial Jobless Claims report. According to the U.S. Department of Labor, jobless claims rose to 240,000 for the week ending May 24, exceeding the market forecast of 230,000 and up from the prior week's revised figure of 227,000. This increase suggests a potential cooling in the labor market, which may deter aggressive monetary tightening by the Federal Reserve.

Explore more on macroeconomic trends affecting forex

Court Ruling Sparks Uncertainty Over U.S. Tariff Policy

Adding to USD weakness is renewed uncertainty surrounding U.S. trade policy. A federal appeals court on Thursday temporarily suspended a lower court's decision against former President Donald Trump's global tariffs, allowing more time to review the case. The legal back-and-forth introduces volatility and potential downside for the USD as markets react to policy instability.

Market Eyes Key Data: U.S. PCE and Canadian GDP

The next major catalysts for the USD/CAD pair are set to arrive later Friday:

• U.S. April Personal Consumption Expenditures (PCE) Price Index: This is the Fed’s preferred measure of inflation. A hotter-than-expected reading could strengthen the USD, while a softer print may reinforce dovish expectations.
• Canadian Gross Domestic Product (GDP): A strong GDP number could support the Canadian Dollar (CAD), putting additional downward pressure on USD/CAD.

These data releases could significantly impact short-term market direction, especially as central banks weigh policy adjustments in a volatile global environment.

Technical Outlook: USD/CAD in Bearish Zone

Technically, USD/CAD remains under bearish pressure near 1.3810, with support seen at 1.3780 and resistance around 1.3860. Unless U.S. data surprises to the upside, momentum appears to favor the CAD in the near term.

Key Takeaways:

• USD/CAD trades near 1.3810, pressured by weak U.S. data and trade policy uncertainty.
• U.S. Initial Jobless Claims rose more than expected to 240K.
• A federal court ruling adds volatility to U.S. tariff expectations.
• Market focus is now on the U.S. PCE Price Index and Canadian GDP data due Friday.