- The dollar was higher on Thursday after thin trading in the previous session.
- The Fed has remained slightly hawkish despite the recent shift in economic data.
- API data revealed a surge in crude inventories.
The USD/CAD outlook is bearish, but the pair has risen slightly ahead of US employment and business activity data, which might give insights into the outlook for rate cuts. Meanwhile, the Canadian dollar pulled back slightly with oil amid signs of poor fuel demand.
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The dollar was higher on Thursday after thin trading in the previous session due to a holiday in the US. Apart from soft retail sales data, it has been a quiet week in the US, with investors now looking forward to unemployment claims and PMI data.
Notably, there is more clarity on the US economy and monetary policy. Investors are more confident that the economy is heading South and inflation is cooling. The retail sales report and the Q1 GDP were some indicators of weaker economic demand. Meanwhile, the consumer and producer price indexes showed a decline in price growth. Consequently, the chances of a rate cut in September have risen.
However, the confusion is that the Fed has remained slightly hawkish despite the recent shift in economic data. Policymakers are likely exercising more caution this time in case the economy surprises again and returns to growth like it did at the start of the year. As a result, they have projected just one rate cut this year. However, this may change depending on incoming data.
Meanwhile, the Canadian dollar was nearly flat after a recent surge amid a rally in oil prices. However, oil retreated slightly after API data revealed a surge in crude inventories.
USD/CAD key events today
- US jobless claims
USD/CAD technical outlook: Bears must confirm reversal below 1.3700
On the technical side, the USD/CAD price has broken below its bullish trendline after showing signs of a looming reversal. Moreover, it trades below the 30-SMA with the RSI in bearish territory below 50. This new bias came after the price made a bearish engulfing candle slightly above the SMA. This was a sign that bears had gained momentum and sentiment had shifted. Consequently, the price broke below its bullish trendline.
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However, the decline has paused at the 1.3700 key level. This might lead to a retest of the recently broken trendline before the downtrend continues. Bears will confirm a new direction when the price breaks below 1.3700.
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Saqib Iqbal
