Home USD/CAD Price Analysis: Eased CAD CPI Lowers BoC Hike Bets

USD/CAD Price Analysis: Eased CAD CPI Lowers BoC Hike Bets

  • Canada’s annual inflation rate decreased to 3.4% from April’s 4.4%.
  • Money markets perceive a roughly 60% likelihood of a BOC rate hike in July.
  • Oil fell amid demand worries as the ECB plans more rate hikes.

Today’s USD/CAD price analysis is bullish. The Canadian dollar lost strength against the US dollar following data that revealed a slowdown in Canada’s inflation. Notably, inflation reached its lowest rate in two years. Canada’s annual inflation rate decreased to 3.4% in May from April’s 4.4%.

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After considering the data, money markets now perceive a roughly 60% likelihood of a rate hike during the Bank of Canada’s upcoming policy decision on July 12. This is a slight decrease from the previous 64%. Earlier this month, the central bank implemented its first tightening since January. Surprisingly, it raised its policy rate by 25 basis points to a 22-year high of 4.75%.

Moreover, the Canadian currency’s decline coincided with a 2.4% drop in the price of oil, one of Canada’s key exports. This decrease was influenced by signals suggesting that the European Central Bank has further interest rate hikes planned. 

Elsewhere, data indicated an increase in US consumer confidence in June to its highest level in almost 1.5 years. At the same time, business spending remained steady in May, indicating a robust economic foundation.

The recent influx of data reinforced the belief in the resilience of the US economy and alleviated concerns about a potential recession. However, it also suggested that the Federal Reserve may need to continue raising interest rates. 

USD/CAD key events today

Investors will be watching Powell’s speech at the European Central Bank Forum. The Fed Chair might drop some clues on future rate hikes. Furthermore, there will be a crude oil inventories report from the US that might impact the loonie.

USD/CAD technical price analysis: Bulls are in the lead after a break above 1.3200.

USD/CAD technical price analysis
USD/CAD 4-hour chart

USD/CAD has experienced a shift in sentiment in the 4-hour chart. Bulls have taken control by breaking above the 30-SMA resistance. At the same time, bullish momentum has strengthened, with the RSI crossing over 50. 

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Furthermore, the price has broken above the 1.3200 resistance level, a sign of strength in the bullish move. With this new bias, the price will likely start seeking higher highs. Therefore, we might see a retest of the 1.3301 resistance.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.