- There was a bigger-than-expected build in crude inventories last week.
- GDP data from Canada showed a bigger-than-expected expansion in the fourth quarter.
- Market participants will watch the outcome of the Bank of Canada interest rate decision.
The USD/CAD weekly forecast leans bullish as the dollar regains strength just in time for the highly anticipated nonfarm employment report.
Ups and downs of USD/CAD
USD/CAD ended the week on a bullish note as the dollar surged against the Canadian dollar. The biggest move of the week came on Wednesday as oil prices fell. Notably, there was a bigger-than-expected build in crude inventories last week, leading to a decline in oil prices. As a result, the Canadian dollar weakened against the dollar.
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Other data in the week included the US PCE price index, which revealed easing annual inflation. Additionally, GDP data from Canada showed a bigger-than-expected economic expansion in the fourth quarter.
Next week’s key events for USD/CAD
Next week, traders will focus on employment data from Canada and the US. These reports will have a significant impact on the outlook for monetary policy in the US and Canada. Moreover, market participants will watch the outcome of the Bank of Canada’s interest rate decision.
Employment figures from the US and Canada came in higher than expected last month, indicating the labor market in both countries remains hot. Consequently, this has kept central banks in both countries cautious about rate cuts.
At the moment, markets expect the first Bank of Canada rate cut in June. Similarly, they expect the Fed to start cutting rates in June. However, this might change with the employment figures.
USD/CAD weekly technical forecast: Bulls fading as the price approaches 1.3600 resistance
On the daily chart, sentiment shifted suddenly from bearish to bullish when the price found support at 1.3200 and broke above the 22-SMA. However, soon after, the bullish momentum weakened, and the move became shallow. Moreover, the price kept puncturing the 22-SMA support line.
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The price has traded in a bullish channel that has now paused at the 1.3600 key resistance level. Meanwhile, the RSI trades above 50, supporting bullish momentum. If bulls regain their previous enthusiasm, the price might break above the 1.3600 resistance level. However, if bears get strong enough to break below the channel support, the price might fall back to retest the 1.3200 support level.
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Saqib Iqbal
