- The USD/CAD outlook is upbeat as Canadian retail sales fell 0.8% in May.
- The BoC is likely to cut rates by 25 basis points on Wednesday.
- A Trump victory would further weaken Looney.
The USD/CAD outlook shows bullish optimism as the Loonie falls amid growing expectations for a Bank of Canada rate cut in July. Meanwhile, the dollar was stable despite new developments on the US political scene.
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The Canadian dollar fell last week after economic reports raised the likelihood of a second BoC rate cut in July. Notably, inflation decreased more than expected, indicating a decline in price pressures. At the same time, data on Friday showed that retail sales in May fell by 0.8 percent compared to April. This was a worse outcome than the forecast of a 0.6% decline.
The Bank of Canada has become the first major central bank to cut borrowing costs. Notably, inflation has behaved, and the economy is in decline. Therefore, policymakers were confident and under pressure to ease the burden of high rates on the economy. With this trend continuing, the central bank is likely to cut rates by 25 basis points on Wednesday. Lower rates in Canada will leave the Canadian dollar vulnerable.
At the same time, US President Joe Biden dropped out of the presidential race on Sunday. However, the betting shows that there is a strong chance that Trump will win. Such an outcome would further weaken Looney. If Trump wins, he could raise tariffs on American imports. It is notable that the US receives about 75% of Canadian exports. Therefore, the tariffs would have a significant impact on the Canadian economy.
Elsewhere, the US dollar held steady as investors awaited more clues on the Fed’s policy outlook. The next big event will be the release of the core PCE price index on Friday.
USD/CAD Key Events Today
Neither Canada nor the US will release major reports. Therefore, the pair could be consolidated.
USD/CAD Technical Outlook: Bullish momentum revisits resistance at 1.3750
On the technical side, the USD/CAD price is in a solid bullish trend, with the price well above the 30-SMA and the RSI near the overbought region. However, the bulls are approaching strong resistance at the 1.3750 level. If they are strong, the price will cross this level to retest the key psychological level of 1.3800.
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On the other hand, if the bulls fail to break the resistance, the price will pull back to retest the 30-SMA or the 1.3675 support level.
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