- Oil prices declined due to worries about a worldwide economic downturn.
- US data indicated a slight easing in inflation and consumer spending.
- Investors will closely examine the US Federal Reserve’s June meeting minutes this week.
Today’s USD/CAD forecast is slightly bullish. The Canadian dollar weakened against the dollar on Monday as oil prices fell.
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Oil prices declined due to worries about a worldwide economic downturn. Moreover, investors feared additional interest rate increases by the US Federal Reserve. These concerns countered optimism about reduced supplies resulting from OPEC+ production cuts.
Meanwhile, the US dollar faced pressure following last week’s economic data, which indicated a slight easing in inflation and consumer spending. This week, investors will closely examine the US Federal Reserve’s June meeting minutes.
Notably, the central bank maintained interest rates at their current levels during the June meeting. However, they hinted that borrowing costs might still need to increase by up to 0.5% by year-end.
Although recent economic data portrayed a resilient US economy, alleviating concerns of a recession, it also fueled expectations that the Fed will continue with its hawkish approach.
Nevertheless, Friday’s data revealed lower-than-expected inflation in May and a sudden deceleration in consumer spending.
This provided additional evidence that the Fed’s rate hikes have the intended effects. The CME FedWatch tool shows that markets are currently pricing in an 84% likelihood of a 25 basis points rate hike at the Fed’s July meeting.
NatWest Markets strategists anticipate the end of the hiking cycle. However, they acknowledged that insufficient progress in inflation data could prompt officials to implement another 25 basis points hike in July.
USD/CAD key events today
Investors will focus on the ISM manufacturing PMI report showing activity levels in the US manufacturing sector.
USD/CAD technical forecast: Bulls struggle to push above the 1.3275 resistance.
After a strong bullish move, USD/CAD has paused at the 1.3275 resistance level. Bulls took over when the price was rejected below the 1.3150 support level. They broke above the 30-SMA resistance and the 1.3200 key level. Furthermore, the RSI pushed above 50, supporting bullish momentum.
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However, this momentum paused when the price reached the 1.3275 resistance level. The price consolidated below this level before retesting the 30-SMA support. Currently, bulls are once again trying to break above 1.3275. Success would lead to a higher high, strengthening the bullish bias.
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