Home USD/CAD Outlook: Soaring on Rising Yields, BOC Meeting Looms

USD/CAD Outlook: Soaring on Rising Yields, BOC Meeting Looms

  • The Canadian dollar remained weak ahead of the Bank of Canada policy meeting.
  • Soaring US bond yields boosted the dollar.
  • Canadian retail sales fell by 0.1% in August.

The USD/CAD outlook takes on a bullish stance as the dollar gains some ground with a boost from soaring US bond yields. Meanwhile, the Canadian dollar remained weak ahead of the Bank of Canada policy meeting. Additionally, investors are eagerly awaiting key events this week, such as the release of US GDP data and the Federal Reserve’s preferred inflation gauge. 

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On Friday, the Canadian dollar gained ground against the US dollar. However, the increase was modest as stock markets declined and domestic retail sales decreased. The decline in sales solidified expectations that the Bank of Canada will maintain its current rates.

Notably, Canadian retail sales fell by 0.1% in August compared to July. Moreover, they will likely remain flat in September, indicating an economic slowdown. Canada’s growth has stalled, partly due to the central bank’s ten rate hikes since March 2022 to bring high inflation to its 2% target.

The Bank of Canada will announce its rates and release its latest forecasts on October 25. Money markets reduced their expectations for a rate hike following the data release. They now see a 15% chance of an increase this week, a slight decrease from the 16% before the data release. 

Adam Button, chief currency analyst at ForexLive, said, “The market briefly considered another Bank of Canada rate hike. However, that possibility is becoming increasingly remote. Rising global yields will significantly reduce the Bank of Canada’s work.”

USD/CAD key events today

The pair will likely consolidate as market participants do not expect data from the US or Canada.

USD/CAD technical outlook: Bulls gear up for new peaks.

USD/CAD technical outlook
USD/CAD 4-hour chart

On the 4-hour chart, USD/CAD is bullish as the price trades slightly above the 1.3701 key level and the 30-SMA. At the same time, there is solid bullish momentum as the RSI trades above 50. After initially breaking above 1.3701, the price pulled back to retest the 30-SMA as support. The SMA held firm, allowing the price to bounce higher.

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Bulls are now preparing to make a new high. Moreover, the price will likely rise to retest the next strong resistance at 1.3800. However, this will only happen if bulls keep the price above the 30-SMA.

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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.