The US dollar is competing for the 1.38 mark against the Canadian dollar, and retail sales data may become crucial

The dollar held steady against the Canadian dollar at around 1.3800 in the Asia-Europe session on Friday, largely holding on to the gains of the previous session. The Canadian dollar weakened mainly due to the higher-than-expected US producer price index (PPI) data for July.

The dollar index, which measures the dollar's performance against a basket of major currencies, remained trading around 98.00.

Data showed that the overall and core producer price indices in the United States recorded a month-on-month increase of 0.9% in July, significantly exceeding the market expectation of 0.2%. Analysts believe that this may reflect companies passing some cost pressures to consumers. Nonetheless, given the continued signs of cooling in the labor market, market participants still generally expect the Federal Reserve to consider adjusting interest rate policy in September.

Next, the market's attention will turn to the US retail sales data for July released in the evening. The market forecasts that the growth rate of this data may slow to 0.5% month-on-month. For traders who follow the movement of currency pairs, such as when operating on platforms such as IG Forex, the release of such economic data often means an increase in market volatility.

On the other hand, the Canadian dollar appears to be moving more cautiously. The Bank of Canada recently released July meeting notes showing that policymakers discussed the adequacy of current interest rate levels against potential external shocks. The central bank decided to keep the base rate unchanged at this meeting.

(Dollar/Canadian dollar daily chart)

From a technical analysis perspective, the USD/CAD is attempting to break through the 100-day moving average to continue its upward trend. Its 14-day relative strength index has risen to near the 60 level. If it can break through effectively, it may confirm a new upward movement.

If the exchange rate can effectively break through the previous high, it may open up further upside, and the follow-up targets can be followed in turn. Conversely, if the key support level is broken, it may test the important psychological level and lower support level downward. Investors need to pay close attention to the changes in the position of these key technologies when formulating trading strategies on platforms such as IG Forex.

As of press time, the U.S. dollar was trading at 1.3796/98 against the Canadian dollar.