- Markets have reduced the probability of a 50bps rate hike from the BoC.
- The Fed will likely still slow rates after the positive US jobs data.
- A few economists expect the BoC to deliver a 50bps rate hike next week.
The USD/CAD weekly forecast is slightly bullish as bets of a 50bps BoC rate hike have gone down. A dovish hike may support the buyers.
Ups and downs of USD/CAD
The Canadian dollar fell against the greenback on Thursday and closed the week higher as investors reduced their bets that the Bank of Canada would increase interest rates by a large amount again next week.
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Since Powell’s remarks, the probability that policymakers will choose to hike interest rates by 50 basis points rather than 25 has fallen from 30% to roughly 10%.
The biggest move came Wednesday after Powell’s comments confirmed a Fed pivot starting in December. On Friday, the US jobs report came in higher than expected, showing a still-tight labor market, though this might not change the Fed’s position.
Next week’s key events for USD/CAD
According to a narrow majority of economists surveyed by Reuters, the Bank of Canada will increase an additional 50 basis points to its benchmark interest rate to 4.25% on December 7. At 6.9% in October, inflation exceeded the central bank’s 2% target more than three times.
The BoC has increased rates by 350 basis points since March, with analysts and markets divided on whether it will make one more half-point increase.
USD/CAD weekly technical forecast: Bulls facing strong resistance zone
The price is trading above the 22-SMA on the daily chart, and the RSI is just above 50, showing bulls are ahead. Bulls took over at the 1.3253 support level as bears could not push any lower.
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The bullish move was weak initially, but the bulls gathered enough momentum to break above the 22-SMA. This was the first sign of a shift in sentiment. However, the bullish move could not go beyond a resistance zone comprising the 1.3500 and 1.3600 key levels.
Therefore, the price retested the 22-SMA and is ready to bounce higher. If bulls are to continue in the coming week, they must break above the resistance zone. This would allow the price to climb to the 1.3802 resistance. If they fail, the price might break below the SMA and retest the 1.3253 support.
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