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  • Canadian GDP came in at 3.3% in Q2, lower than forecasts.
  • Analysts do not expect BoC to be swayed by recent economic data.
  • Markets expect a 75bps rate hike from BoC.

Today’s USD/CAD outlook is bullish. Data released on Wednesday indicated that Canadian economic growth slowed in the second quarter and most likely fell into negative territory in July, suggesting that the economy may be cooling more swiftly than anticipated in front of next week’s rate announcement.

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According to Statistics Canada, the Canadian economy expanded at an annualized rate of 3.3% in the second quarter, below both analysts’ and Bank of Canada’s expectations of 4.0% and 4.4%, respectively.

“I think it all signals that the economy is weakening, perhaps faster than even we expected,” said Jimmy Jean, chief economist at Desjardins Group.

According to experts, the negative print for July indicates that third-quarter growth will fall short of the Bank of Canada’s prediction of 2.0%. However, it was unlikely to cause the central bank to change its course and stop tightening.

“I don’t think these changes much for the Bank of Canada. Their target, their major focus is inflation above all, so even though growth is a little bit shy of expectations, there’s no relief here,” said Doug Porter, chief economist at BMO Capital Markets.

Although it decreased to 7.6% in July from a nearly four-decade high of 8.1% in June, Canadian inflation is still significantly higher than the central bank’s 2% target.

Following a surprise 100-bp boost to 2.5% in July, the money markets predict that the Bank of Canada will raise rates by 75 basis points at its decision next week.

USD/CAD key events today

The initial unemployment claims data for today, which is predicted to increase from 243K to 248K, will be included in news releases from the United States. It is anticipated that the ISM Manufacturing PMI for August will decrease from 52.8 to 52.0.

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USD/CAD technical outlook: Bulls making consistently higher highs

USD/CAD outlook

When we look at the 4-hour chart, the price is trading above the 30-SMA, which shows that bulls are in charge. As long as the RSI trades above 50, bullish momentum is supported. Price has surpassed a critical resistance level of 1.31004 and is likely to move higher.

The price might retest the recently broken resistance as support before making new highs.

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