- The USD/CAD pair had a sharp rise in October.
- Inflation in Canada has eased significantly, increasing interest rate cut bets in a big way.
- Oil rose on an improving demand outlook in China.
The USD/CAD forecast points to profit-taking after a strong rally, with the pair easing ahead of a key Bank of Canada policy meeting. At the same time, the Canadian dollar strengthened as oil prices rose on an improved demand outlook.
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The USD/CAD pair had a sharp rally in October, with a stronger US dollar as the primary catalyst. At the same time, the Canadian dollar weakened as expectations of a rate cut by the Bank of Canada increased.
The dollar strengthened as it became clear that the US economy was on solid ground. So the Fed has plenty of room to gradually reduce borrowing costs. Initially, there were fears that the economy was slowing down rapidly. As a result, Fed policymakers voted for a significant rate cut in September. However, they have since changed their stance and taken a more cautious tone, boosting the dollar.
Moreover, the dollar gained due to speculation about the upcoming US presidential elections. At some point, Trump was in the lead, which increased the likelihood of high inflation. At the same time, uncertainty about the possible outcome sends traders into safe assets.
On the other hand, inflation in Canada has come down significantly, increasing bets on a major rate cut. As a result, the CAD fell sharply. However, the rise in oil prices on Tuesday allowed the crazy to recover slightly. Oil rose on an improving demand outlook in China due to recent stimulus efforts.
USD/CAD Key Events Today
- BoC monetary policy meeting
- BoC exchange rate statement
- BoC press conference
USD/CAD Technical Forecast: Bears are showing strength near 1.3825
From the technical side, USD/CAD price made a new high above 1.3825 before retreating towards the 30-SMA support. Bears recently showed strength when the price broke the SMA support. However, the bulls soon regained control and made a new high.
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However, the bullish move was weak, characterized by small candles. At the same time, although the price made a higher high, the RSI made a lower one, indicating a bearish divergence. If the divergence plays out, the price will soon break below the 30-SMA to retest the 1.3750 support level. Moreover, such a move would indicate a change in sentiment towards the bearish.
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