- Minutes from Wednesday’s FOMC meeting revealed that policymakers are poised to cut rates in September.
- US business activity fell in August.
- Powell’s speech confirmed the September rate cut and sank the dollar.
The weekly USD/CAD forecast suggests a bearish trend, with the Canadian dollar gaining as the US dollar weakens after Powell’s speech.
USD/CAD Ups and Downs
The USD/CAD pair had a bearish week, with most of the movement on Friday. The week began with minutes from the FOMC meeting, which revealed that policymakers are poised to cut rates in September. After that, data showed that US business activity fell in August, increasing bets for a September Fed rate cut.
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Meanwhile, data from Canada revealed a 0.3% drop in sales, as expected. On the other hand, core retail sales jumped by an unexpected 0.3%. The week ended with Powell’s speech, which confirmed the September rate cut and sank the dollar.
Next week’s key events for USD/CAD
Next week, the US will release data on core durable goods and GDP. Meanwhile, Canada will release only its GDP report. The US GDP report will show the state of the economy amid high interest rates. The latest report showed a larger-than-expected expansion, indicating resilience. Another such report could ease pressure on the Fed to lower borrowing costs. On the other hand, a bad report could increase bets for a 50 bps rate cut.
Similarly, Canada’s GDP report will shape the outlook for a Bank of Canada rate cut. Markets are already betting on another rate cut in September.
USD/CAD Weekly Technical Forecast: Bears break out of consolidation
On the technical side, the USD/CAD price has broken out of consolidation with a large bearish candle. For a long time, the price traded between support at 1.3601 and resistance at 1.3800. When the price was ready to trend, the bulls made the first attempt at resistance at 1.3800. However, it ended up being a false breakthrough. Price made a big fuse, indicating a rejection, before returning to the range area.
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Bears pushed the price below the support level at 1.3601 with a strong red candle. Price is trading well below the 22-SMA, with the RSI in the oversold region. Therefore, the bearish bias is strong. Next week, the price could return to the recently broken level before continuing lower.
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