- Canada’s GDP expanded by 0.2% in July, compared to estimates of 0.1%.
- The US core PCE price index came in lower than expected.
- Traders are pricing a 50% chance of a massive BoC cut in October.
The USD/CAD forecast shows continued weakness in the Canadian dollar due to the prospect of a significant Bank of Canada rate cut in October. Meanwhile, the dollar was also fragile after PCE data revealed an unexpected decline in price pressures.
–Are you interested in learning more about Canada forex brokers? Check our detailed guide-
The Canadian dollar fluctuated on Friday after domestic data showed better-than-expected economic growth. Canada’s GDP expanded by 0.2% in July, compared to estimates of 0.1%. However, the currency soon reversed as market participants digested the estimates. According to the report, the economy might stall in August. Consequently, traders are pricing a 50% chance of a massive BoC cut in October.
Meanwhile, the US dollar lost ground on Friday after the core PCE price index came lower than expected. Notably, US inflation increased by 0.1%, missing forecasts of a 0.2% increase. At the same time, the annual figure eased to 2.2%, coming closer to the Fed’s 2% target.
Inflation is coming down consistently and will likely soon reach the Fed’s target. As a result, policymakers are confident they have won the fight. Therefore, the Fed will not hesitate to cut interest rates. Moreover, market participants are pricing another 50-bps cut in November. Such significant cuts will put the Fed at the same level as other central banks that started easing earlier, such as the Bank of Canada.
Furthermore, it will give these central banks the confidence to increase their size of rate cuts. More rate cuts in the US will weigh on the dollar. However, since the BoC is also reducing borrowing costs, the pair might consolidate.
USD/CAD key events today
- Fed Chair Powell Speaks
USD/CAD technical forecast: Bulls charge past 1.3500 level
On the technical side, the USD/CAD price has recovered beyond the 30-SMA. The break above the SMA indicates a shift in sentiment. At the same time, the RSI has broken above the 50-mark and now trades in bullish territory.
–Are you interested in learning more about social trading platforms? Check our detailed guide-
Bulls made a solid candle that broke above the 1.3500 resistance and the 0.382 Fib level. If this trend continues, USD/CAD will soon reach the 0.618 Fib retracement level. Still, the price must start making higher highs and lows to confirm a new bullish trend.
Looking to trade forex now? Invest at eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money
Share
Saqib Iqbal
