- Data on Tuesday showed upbeat US retail sales, indicating resilience.
- Canada’s inflation eased more than expected, boosting bets for a July rate cut.
- The Bank of Canada will likely cut rates next week.
The USD/CAD weekly forecast paints a strong bullish picture as the Canadian dollar plummets amid poor data and a looming BoC rate cut.
Ups and downs of USD/CAD
The USD/CAD pair had a bullish week as the US dollar soared against a weak Canadian dollar. Although the dollar was weak in the broader market, the loonie was weaker. Data on Tuesday showed upbeat US retail sales, indicating resilience. Meanwhile, inflation eased more than expected in Canada, boosting bets for a July rate cut.
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To make matters worse, Canada reported dismal sales on Friday, well below expectations. This clearly showed that the economy is falling apart due to high rates. Consequently, the Bank of Canada has every reason to lower borrowing costs.
Next week’s key events for USD/CAD
Investors will focus on the Bank of Canada policy meeting next week. Meanwhile, reports on GDP and durable goods in the US will be released.
The Bank of Canada will likely cut rates next week after inflation eased further in June. The chances of a cut in July rose sharply after data this week showed that inflation in Canada increased by a smaller-than-expected 2.7%. This came after a jump of 2.9% in May. At the same time, economists expect the central bank to cut twice more in 2024.
Meanwhile, US GDP data will show the state of the economy. However, unless a big surprise exists, it might not change the outlook for a cut in September.
USD/CAD weekly technical forecast: Bulls charge for range resistance level
On the technical side, the USD/CAD price trades above the 22-SMA, with the RSI rising above 50, showing that bulls are in control. However, the price has been trading sideways, chopping through the SMA. Therefore, bears and bulls are equally matched, and the market has no clear direction.
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Notably, the price has stayed in a range between the 1.3600 support and the 1.3750 resistance. Therefore, the price must break out of this area to start trending. Since bulls are in charge, the price might challenge the range resistance. A break above would allow the price to revisit the 1.3900 key level. However, if the price fails to break above, it might continue consolidating.
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