- Several economic reports from the US point to a slowing economy.
- US business activity fell in April, showing the impact of higher interest rates.
- Investors will focus on the FOMC meeting and the US jobs report.
A subtle bearish trend is emerging in the USD/CAD weekly forecast as the dollar abandons its strong position amid a slowing US economy.
USD/CAD Ups and Downs
The USD/CAD pair had a bearish week characterized by dollar weakness. Several economic reports from the US pointed to a slowing economy weighing on the dollar. It is noticeable that business activity fell in April, showing the impact of higher interest rates.
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Similarly, the economy grew at a lower-than-expected 1.6% rate in the first quarter. While this was a welcome relief for the Fed, inflation remained high, leading to lower rate cut expectations.
Next week’s key events for USD/CAD
Next week Canada will release its Gross Domestic Product report. Canada’s economy has slowed significantly as higher interest rates dampen demand. A weak GDP report would likely increase the chances of a first BoC cut in June.
Meanwhile, investors will focus on the FOMC meeting and the US jobs report to indicate when the Fed might start cutting interest rates. Due to stubborn inflation, the central bank is likely to hold rates and urge patience on rate cuts.
In addition, the NFP report could surprise again. In such a case, investors would reduce expectations of a Fed rate cut.
USD/CAD Weekly Technical Forecast: Uptrend pauses, pullback reaches SMA support
On the technical side, the USD/CAD price pulled back to retest the 22-SMA after finding resistance at the key 1.3840 level. At the same time, the RSI fell to the 50 mark, which it respects as support. This is a sign that the bullish trend has stalled for a pullback.
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Furthermore, the price is now trading with the nearest support at 1.3601 and the nearest resistance at 1.3840. Since it is in a bullish trend, creating higher highs and lows, it could respect the SMA as support and climb to retest the nearest resistance.
However, there will be a change in sentiment if the price breaks below the SMA and the nearest support level. This would signal a bearish takeover, allowing the price to target the 1.3400 support level.
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