- The USD/CAD forecast indicates a sharp pullback from Friday’s peaks.
- The pair dropped last week as Trump renewed his attacks on the Fed.
- US data revealed that inflation rose by 0.2% compared to estimates of 0.1%.
The USD/CAD forecast suggests a sharp pullback from Friday’s peaks as focus shifts back to US monetary policy. Initially, the Canadian dollar collapsed after downbeat GDP data, sending USD/CAD higher. However, it pulled back sharply after upbeat US inflation figures eased expectations for a Fed rate cut.
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The pair dropped last week as Trump renewed his attacks on the Fed. A Wall Street Journal hinted at a likely replacement of Powell by September or October. This is because he has kept delaying rate cuts.
The major concern for policymakers is that higher tariffs will lead to increased inflation. High import costs can translate to increased price pressures in the US economy. Such an outcome would require high interest rates.
Meanwhile, on Friday, the pair rebounded after data revealed that Canada’s economy contracted by 0.1%. Economists had expected no change. The move later reversed after US data revealed that inflation rose by 0.2% compared to estimates of 0.1%. The report increased the likelihood of further Fed rate cut delays.
This week, traders will watch US employment data for more clues on the state of the economy. The report will also influence the outlook for rate cuts.
USD/CAD key events today
Market participants are not looking forward to any key economic reports from the US or Canada today. Therefore, traders will keep digesting Friday’s releases.
USD/CAD technical forecast: Bears aim for 1.3625 after SMA rejection
On the technical side, the USD/CAD price is pulling back after failing to break above the 30-SMA resistance line. The bias recently shifted from bullish to bearish after the previous move paused near the 1.3800 key resistance level. Bears took charge by sending the price below the SMA and the RSI under 50. At the same time, USD/CAD started making lower highs and lows, suggesting a new decline.
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Last week, the move paused near the 1.3625 support level. This allowed the price to bounce back strongly. However, despite the steep pullback, it closed back below the SMA, forming a large wick. This was a sign of rejection.
Therefore, this week, bears might aim for new lows below 1.3625. This could mean a retest of the 1.3550 support level. A break below would solidify the bearish bias.
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