- The USD/CAD forecast shows an extension of the previous session’s move.
- The Bank of Canada held rates as expected on Wednesday.
- The US economy grew by 3.0%, compared to the forecast of 2.5%.
The USD/CAD forecast shows an extension of the previous session’s move as the Canadian dollar continues its slide. Both the Bank of Canada and the Fed kept rates unchanged on Wednesday. Meanwhile, upbeat data from the US boosted the dollar against most of its peers.
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The Bank of Canada held rates as expected on Wednesday, noting that the economy remained resilient. At the same time, policymakers believe some underlying inflation pressures could further delay rate cuts.
“Canada’s economy is showing some resilience so far… inflation is close to our 2% target, but we see evidence of underlying inflation pressures,” said Governor Tiff Macklem.
As a result, traders are pricing an 81% chance that the central bank will pause again in September. However, there is a growing risk of a 35% tariff that could change this outlook.
Similarly, the Fed held rates. However, two policymakers voted to cut by 25-bps. Still, the greenback gained after a bigger-than-expected increase in private employment. At the same time, the US economy grew by 3.0%, compared to the forecast of 2.5%.
USD/CAD key events today
- Canada GDP m/m
- US core PCE price index m/m
- US employment cost index q/q
- US unemployment claims
USD/CAD technical forecast: Bears emerge after a break above 1.3800
On the technical side, the USD/CAD price has broken above the 1.3800 key level and is quickly approaching the 1.3850 level. At the same time, the price trades well above the 30-SMA and the RSI is in the overbought region, suggesting a solid bullish bias.
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The price has maintained a steep rally since bulls took charge near the 1.3575 support level. Moreover, there have been no pullbacks or pauses to retest the 30-SMA. Even when the price broke above the 1.3750 key resistance level, it barely paused to retest the level before climbing to make new highs.
However, after such a steep rally, bears have shown some strength and might trigger a pullback. A deep pullback would retest the 1.3750 level or the 30-SMA. On the other hand, a shallow pullback would retest the 1.3800 key level before the rally continues.
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