USD/CAD Price Analysis: Canadian Firms Expect Mild Recession

• Most Canadian firms anticipate a mild recession over the coming year.

• Business confidence in Canada continued to deteriorate in the fourth quarter.

• Consumer expectations for Canada’s inflation a year from now increased to a record-high 7.18%.

Today’s USD/CAD price analysis is slightly bullish. According to a report released on Monday by the Bank of Canada, most Canadian firms anticipate a mild recession over the coming year as rising interest rates restrain consumer spending and investment plans.

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According to a quarterly study, business confidence continued to deteriorate in the fourth quarter, and predictions for weaker sales growth grew for the fourth quarter. In the coming year, two-thirds of businesses anticipate a recession, with 90% anticipating a mild one.

Nearly 30% of businesses anticipate declining sales during the coming year, primarily due to weaker domestic demand. Numerous companies said rising interest rates slowed the housing market and household demand.

When it increased rates in December at its most recent policy meeting, the Bank of Canada stated that it would examine economic figures to determine whether to raise interest rates further.

Consumer pricing data for December will be made public on Tuesday, and on January 25, the Bank of Canada will issue updated forecasts and announce its next policy decision.

Tiff Macklem, governor of the Bank of Canada, mentioned the possibility of sticky, or persistent, inflation in his most recent statements. Such inflation might necessitate “much higher” interest rates.

According to the central bank, consumer expectations for inflation a year from now increased to a record-high 7.18%.

USD/CAD key events today

Investors expect inflation figures from Canada that will determine the next steps for the Bank of Canada.

USD/CAD technical price analysis: Struggle for control at the 30-SMA

The 4-hour chart shows USD/CAD trading at the 30-SMA and the RSI near 50. These are key areas that show either bears or bulls can take over by pushing the price above or below. This comes after the RSI made a bullish divergence that showed weakness in the bearish move. 

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Bulls have shown their strength, but the price has paused at the 30-SMA, proving difficult to break. If bulls win this battle and go above the 1.3450 resistance, we could see a reversal in the trend. However, if the bears win, the price will likely retest the 1.3351 support.

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