Home USD/CAD Forecast: Dollar Holds Near 6-Week High Ahead of GDP

USD/CAD Forecast: Dollar Holds Near 6-Week High Ahead of GDP

  • The fourth-quarter US gross domestic product will likely reveal a 2% annualized growth.
  • On Wednesday, the Bank of Canada maintained its key overnight rate at 5%.
  • Money markets fully anticipate a 25 basis point BoC rate cut in June.

Thursday’s USD/CAD forecast hinted at bullish prospects, with the dollar standing resilient near a six-week high. Investors eagerly awaited GDP and other critical data, seeking valuable insights that could give clues on the outlook for US interest rates. 

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The initial report on the fourth-quarter US gross domestic product will likely reveal a 2% annualized growth. Moreover, the report might show that the US avoided a recession in 2023. Furthermore, it will likely indicate a slowdown in inflation during the last quarter. This could fuel expectations of potential rate cuts in the first half of 2024.

Meanwhile, the Canadian dollar weakened after the Bank of Canada held its key overnight rate at 5% on Wednesday. Additionally, it emphasized a shift in focus from concerns about underlying inflation to considering when to cut rates. 

Canadian money markets expect a 25 basis point cut in June. The BoC removed language from previous policy statements on possible rate hikes. However, Governor Macklem later mentioned that the possibility of additional rate hikes had not been ruled out.

Furthermore, the BoC adjusted its growth outlook, anticipating weak growth in the first quarter, followed by a gradual pickup. Inflation will likely stay around 3% in the first half of 2024, easing to 2.5% in the second half. Meanwhile, a return to the 2% target will likely happen sometime in 2025.

USD/CAD key events today

  • Advance US GDP q/q
  • US unemployment claims

USD/CAD technical forecast: Bulls make a comeback

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

On the technical side, USD/CAD has retested the 1.3525 resistance level after the bearish takeover failed at the 1.3425 support level. At the moment, bulls are attempting to resume the previous bullish trend. They have pushed the price above the 30-SMA, and the RSI is above 50.

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Initially, bears had attempted to take control when the price broke below the 30-SMA. However, they were not strong enough to continue below the 1.3425 support level, allowing bulls to regain control.

Now, bulls are facing strong resistance. At the same time, the RSI is showing weaker bullish momentum at this resistance. If it holds, the price will fall back to the 1.3425 support. Meanwhile, the bullish trend will continue if bulls regain momentum.

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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.