- The USD/CAD outlook suggests resilience in Canada’s manufacturing sector.
- Canada’s factory sales expanded by 2.5% compared to the forecast of 1.8%.
- The Fed will likely cut rates by 25-bps.
The USD/CAD outlook suggests resilience in Canada’s manufacturing sector despite tariff uncertainty. As a result, the Canadian dollar has rallied since the previous session despite expectations for a BoC rate cut on Wednesday. Meanwhile, the dollar remained weak ahead of the Fed meeting.
–Are you interested in learning more about ETF brokers? Check our detailed guide-
Data on Monday revealed that Canada’s factory sales expanded by 2.5% compared to the forecast of 1.8%. The report eased worries about the impact of tariffs on the economy, allowing the loonie to climb.
“It’s a good start to the week,” said Adam Button, chief currency analyst at ForexLive. “The market is on edge about the manufacturing sector, and to get some solid numbers right in the heart of the summer demonstrates some resilience in the economy.”
However, traders still expect the Bank of Canada to cut rates on Wednesday. The labor sector has shown weakness, putting pressure on policymakers to ease further. However, before the meeting, Canada will release its inflation report, shaping the outlook for BoC policy.
On the other hand, the Fed will likely cut rates by 25-bps. At the same time, policymakers could assume a more dovish tone due to the labor market weakness. Such an outcome would further weigh on the dollar.
USD/CAD key events today
- Canada consumer inflation report.
- US core retail sales m/m
- US retail sales m/m
USD/CAD technical outlook: Channel breakout triggers a sharp drop
On the technical side, the USD/CAD price has broken out of its bullish channel and made a steep decline. It now trades well below the 30-SMA, a sign that bears have a strong lead. At the same time, the RSI has entered the oversold region, indicating massive bearish momentum.
–Are you interested in learning more about Canada forex brokers? Check our detailed guide-
Bears showed the first sign of strength when the price made an engulfing candle after meeting the 1.3875 resistance level. Furthermore, the price started making large red candles that eventually broke below the 30-SMA and the channel support line. After that, the path was clear for USD/CAD to retest the 1.3750.
Bears are currently approaching the 1.3750 support. Here, the decline could pause after such a sharp move. A pause would allow bears to regain momentum and the SMA to catch up. Afterwards, the decline could continue with a break below 1.3750, or bulls will take back control.
Looking to trade forex now? Invest at eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
