- The People’s Bank of China has announced plans to cut borrowing costs by 50 basis points.
- Bank of Canada Governor Tiff Macklem gave a dovish speech.
- The dollar fell after data showed weaker-than-expected consumer confidence.
The USD/CAD forecast shows a new low for the pair this year after the loonie rallied on improved risk sentiment. On Tuesday, China announced a stimulus package to support the economy, boosting commodity currencies like the Canadian dollar.
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The People’s Bank of China announced plans to cut borrowing costs by 50 basis points, among other measures to support the economy. China is a major consumer of most major commodities, including oil. Meanwhile, Canada is a net oil exporter and is benefiting from higher global demand. As a result, oil prices rose along with the Canadian dollar.
Moreover, oil rose on supply concerns due to tensions in the Middle East and the threat of hurricanes in the US.
Elsewhere, Bank of Canada Governor Tiff McClem gave a dovish speech, increasing bets for a BoC rate cut. He noted that the central bank has made a lot of progress in reducing inflation. Namely, inflation in Canada reached the target of 2% in August. Therefore, market participants should expect more rate cuts in the future.
Meanwhile, the dollar fell after data showed weaker-than-expected consumer confidence. Consumer confidence in the Central Bank fell sharply from 105.6 in August to 98.7. Moreover, it turned out that it is increasingly difficult for people to find work. Worries about the labor market weighed on the dollar as that could mean an even more dovish Fed.
After last week’s massive rate cut, market participants are waiting for more data to give an indication of the next move. The main economic indicator is the core PCE which should be expected on Friday.
USD/CAD Key Events Today
There will be no high-impact events in the US or Canada. Therefore, the pair could extend yesterday’s move.
USD/CAD Technical Forecast: Channel breakout triggers a sharp decline
On the technical side, the price of USD/CAD fell sharply after breaking out of its bullish channel. The decline broke several key support levels, including 1.3450. Furthermore, the price fell well below the 30-SMA, with the RSI falling into the oversold region.
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Bears are in charge, who are enthusiastic to push prices lower. However, USD/CAD could recover to retest the recently broken 1.3450 level before continuing lower. The next major obstacle for the downtrend is at the 1.3400 level.
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