- The dollar started the week strong as markets reacted to Trump’s choice for Treasury Secretary.
- Canada’s inflation increased by 0.4%, above estimates of 0.3%.
- Retail sales in Canada jumped by 0.4% in September.
The USD/CAD outlook shows a rebound in the pair as the dollar rallies after Trump chose a new Treasury Secretary. However, the pair remained near lows marked last week when the Canadian dollar soared after upbeat economic data.
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The dollar started the week strong as markets reacted to Trump’s choice for Treasury Secretary. Scott Bessent has been a supporter of Trump’s tariff policy proposals. Moreover, he has openly supported a stronger dollar, making his nomination bullish for the currency.
Markets are paying close attention to developments in the US after Trump’s win. The president-elect will take office in January and might start pushing for policy changes. Experts have noted that the Republican Party holds most seats in both houses of Congress, making it easy for Trump to make policy changes.
Meanwhile, the Canadian dollar gave up some of last week’s gains but remained near its highs. The loonie had a strong week where economic data lowered the likelihood of another super-sized rate cut in December. The Bank of Canada lowered borrowing costs by 50-bps in October as data showed slower economic growth. Moreover, policymakers signaled more rate cuts in the future, prompting markets to price another massive move.
However, data last week revealed that inflation increased by 0.4%, above estimates of 0.3%. At the same time, retail sales jumped by 0.4% in September, with the core figure increasing by 0.9%. Moreover, estimates showed a 0.7% increase in October. As a result, markets lowered the likelihood of another 50-bps rate cut in December.
USD/CAD key events today
The pair might start the week slowly, as traders do not expect key reports from Canada or the US.
USD/CAD technical outlook: Bears gear up for a break below 1.3951
On the technical side, the USD/CAD price has paused near the 1.3951 support level. Nevertheless, the bias is bearish since it trades below the 30-SMA, with the RSI in bearish territory. The trend recently reversed when the price paused at the 1.4100 resistance level.
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Bears confirmed a reversal when they pushed below the 30-SMA and the bullish trendline. However, they must now make lower highs and lows to continue the downtrend. Therefore, USD/CAD might break below 1.3951 to retest the 1.3850 support level.
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Saqib Iqbal
