- The Fed might stick to the earlier planned 75bps rate hike.
- Rising oil prices are supporting the Canadian dollar.
- Bearish momentum is back on the charts.
Today’s USD/CAD forecast is bearish as inflation expectations in the US have gone down, which could mean a 75bps rather than a 100bps rate hike from the Fed.
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“This softening of inflation expectations is one reason why we expect the FOMC will not accelerate the near-term hiking pace and will deliver a 75bp hike at the July FOMC meeting,” said analysts at Goldman Sachs in a note. This news has seen the dollar pull back from its highs and the USD/CAD fall.
On the other hand, the Canadian dollar is gaining some ground as oil prices move slightly higher. Investors are still hopeful that Joe Biden’s trip to the Middle East will successfully boost oil output.
USD/CAD key events today
USD/CAD investors will be paying attention to Canada’s housing starts report, which is set to come out later today. This report shows how the housing sector is doing as it measures the change in the annualized buildings that began construction in the reported month. Investors expect the report to show a drop from 287.3K to 266.6K.
From the US, Treasury International Capital will report Net Long-Term Transactions. This report measures the difference in value between long-term foreign securities bought by US citizens and US long-term securities bought by foreigners. These foreigners must buy the domestic currency to purchase securities in the US. Therefore, a rise in demand for US securities will point to a rise in demand for the US dollar.
USD/CAD technical forecast: Price heading for July 13 lows at 1.29362
Looking at the 4-hour chart, we see the price in a bearish move. It has broken below the 30-SMA, and the RSI is trading below 50, showing bears have taken control. On July 14, the price failed to close above 1.31655, which acted as resistance. Since then, it has been falling impulsively and might only pause at 1.29362, which acted as support on July 13.
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This pause might be brief before the price retests lower support at 1.28512. However, the July 13 support might hold, forcing the price to resume its bullish trend above the 30-SMA. The bias remains bearish if the price stays below the 30-SMA and the RSI trades below 50.
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Saqib Iqbal
