- BoC Governor Tiff Macklem said the economy could grow as inflation eases.
- Traders have a 72% chance of another Bank of Canada cut in July.
- Economists expect data from the US PCE index to show a further reduction in inflation.
The USD/CAD outlook tilts bearish as the Canadian dollar gains after an upbeat BoC outlook for the Canadian economy and ahead of the inflation report. At the same time, the dollar pulled back as markets prepared for the PCE price index report due on Friday.
–Are you interested in learning more about the next cryptocurrency to explode? Check out our detailed guide-
On Monday, the Canadian dollar jumped to a three-week high after BoC Governor Tiff McClam said the economy could grow as inflation eases. He also believes the central bank will achieve a soft landing.
The Bank of Canada recently began its cycle of interest rate cuts. Furthermore, traders have a 72% chance of another cut in July. However, this probability could change with CPI data due today. Economists expect the consumer inflation report to show inflation falling to an annual rate of 2.6% in May from 2.7% in the previous month. Experts believe that such an outcome would make another rate cut in July certain.
The Canadian dollar also received support from the rise in oil prices in the previous session. The rally took place amid optimism about increased demand during the summer driving season.
On the other hand, the US dollar fell as investors awaited more data for clues on the Fed’s policy outlook. The main focus this week is the PCE price index report. Economists expect the numbers to show further moderation in inflation, which could raise expectations for a rate cut by the Fed.
USD/CAD Key Events Today
- Canadian Consumer Price Index m/m
- Canadian average consumer price index y/y
- Canada decreased the consumer price index y/y
- Consumer Confidence USA CB
On the technical side, the USD/CAD price broke below the key support level of 1.3680. At the same time, it has pushed well below the 30-SMA, with the RSI approaching the oversold region. Consequently, the bearish bias has strengthened.
–Are you interested in learning more about forex tools? Check out our detailed guide-
However, the price reached the 0.786 Fib level which could act as support. If that happens, the price could return to retest the recently broken 1.3680 level. However, since the bearish bias is strong, there is a good chance that the downtrend will continue with the next target at 1.3605.
Do you want to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
