- Data last week raised expectations for a huge BoC rate cut.
- Oil has recently fallen due to tensions in the Middle East.
- The dollar rallied on Monday as market participants weighed in on a likely Trump victory in November.
The USD/CAD outlook shows a slow uptrend amid bets on a massive BoC rate cut on Wednesday. At the same time, the dollar strengthened as markets increasingly priced in a Trump victory in November.
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Data last week raised expectations for a massive interest rate cut. Notably, inflation in Canada eased more than expected to 1.6%, increasing pressure on the central bank to reduce borrowing costs. At the same time, Canada’s economy has deteriorated due to high interest rates. Currently, markets are pricing in a 90% chance that the BoC will cut rates by 50 basis points on Wednesday.
Meanwhile, the Loonie barely reacted to news that China is planning financing to support its stock market. The stimulus to support China’s economy is bullish for oil as it improves the outlook for demand. However, oil has recently fallen due to tensions in the Middle East. Accordingly, the CAD also declined.
Elsewhere, the dollar rallied on Monday as market participants weighed in on a likely Trump victory in November. As the US presidential election approaches, traders are increasingly expecting a Trump victory. This supports the dollar as Trump’s policies could mean higher inflation. Such an outcome would make it more difficult for the Fed to keep cutting interest rates. Moreover, it could lead to a turnaround that would boost the dollar.
Moreover, data from the US showed a resilient economy, changing Fed rate cut expectations. Markets now expect a gradual easing phase with a 95% chance of a 25 bps cut in November.
USD/CAD Key Events Today
There will be no key events in the US or Canada today, so the pair are likely to extend their gains.
USD/CAD Technical Outlook: Bulls losing steam
From the technical side, USD/CAD price retests resistance at 1.3825. It is trading above the 30-SMA, while the RSI is trading near the overbought region, supporting the bullish bias. However, there are signs that the bulls may be ready to relinquish control.
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First, the price recently broke through the 30-SMA, showing stronger bearish momentum. At the same time, the RSI is making lower highs, indicating a weakening of the bullish momentum. Therefore, if the price fails to break above the resistance at 1.3825, it could reverse to the downside.
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