- Canada’s economy experienced a third consecutive month of underperformance.
- The annual inflation rate in Canada remained at 3.1% in November.
- US prices saw their first decline in more than 3 1/2 years in November.
The outlook changes in the weekly USD/CAD forecast as the Bank of Canada urges caution, saying it is premature to predict a rate cut. Meanwhile, in the US, traders expect interest rate cuts in 2024 on the back of softer inflation.
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USD/CAD Ups and Downs
The pair had a weak week as the Canadian dollar strengthened with oil prices on supply concerns. Furthermore, the currency weakened as the dollar fell after the report on the core PCE index.
In November, US prices experienced their first drop in more than 31/2 years. The decline raised expectations of a rate cut by the Federal Reserve in March.
Meanwhile, the Canadian economy saw its third straight month of underperformance in October. Moreover, economists predict modest growth prospects for November. The central bank claims that it is premature to predict a rate cut. However, financial markets expect interest rates to fall from April.
Elsewhere, Canada’s annual inflation rate remained at 3.1 percent in November, exceeding the central bank’s 2 percent target.
Next week’s key events for USD/CAD
There are no key events next week as the markets will be closed for Christmas. That’s why investors will be preparing for next year.
The new year will begin with big reports from the US, including minutes from the FOMC meeting and the monthly employment report. Similarly, Canada will release data on changes in employment.
Traders will be excited about the minutes from the FOMC meeting as they could contain clues about the Fed’s policy outlook.
Meanwhile, employment reports from the US and Canada will influence decisions at the next Fed and BoC policy meetings.
USD/CAD Weekly Technical Forecast: Decline pauses at 1.27 fib extension level
The price of USD/CAD fell below the main support levels, strengthening the bearish bias. After respecting the 22-SMA as resistance, the price fell through the 1.3500 and 1.3350 support levels. At the same time, it fell well below the SMA, showing a steep and strong bearish movement. Meanwhile, the RSI fell into oversold territory, supporting solid bearish momentum.
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However, the price also extended to a strong fib support level at 1.27. Therefore, the bulls could get an opportunity to push the price from this support level to retest the key level of 1.3350 or 22-SMA. However, the price is then likely to continue lower with the next target at the 1.3100 support.
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