- Canada’s annual inflation rate fell more than expected to 3.1%.
- Money markets have almost fully priced in the BoC’s rate cut by April.
- Speculators increased their bets on the Canadian dollar.
Wednesday’s USD/CAD price analysis painted a bullish picture, influenced by Tuesday’s data revealing a slowdown in Canadian inflation. Furthermore, investors were absorbing the minutes from the recent Federal Reserve meeting.
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In October, Canada’s annual inflation rate fell more than expected to 3.1%. Meanwhile, measures of core inflation hit their lowest points in about two years. Simon Harvey of Monex Europe and Monex Canada said: “This is consistent with our belief that the BoC, having led the Fed in the tightening cycle, will again lead in the easing cycle in 2024, with tapering likely as early as April.”
Moreover, in recent weeks the markets have gradually adjusted to this perspective. Accordingly, the Canadian dollar lagged the G10 rally driven by a weaker dollar. In addition, money markets have almost fully priced in the BoC’s rate cut by April and are anticipating three cuts next year.
The upcoming BoC rate decision will be on December 6. Moreover, it will come after the release of third-quarter GDP data, which is expected to reveal a slight slowdown in the Canadian economy.
Elsewhere, data from the U.S. Commodity Futures Trading Commission showed speculators increased their bearish bets on the Canadian dollar to the highest level since June 2017.
Meanwhile, the US dollar has recovered from recent losses against a basket of major currencies. The recovery came as Federal Reserve officials, at their last meeting, agreed to take a cautious approach to future interest rate hikes.
USD/CAD Key Events Today
- Durable goods orders for the US core
- First jobless claims in the US
- US crude oil inventories
USD/CAD Technical Price Analysis: Bulls struggle against 30-SMA resistance
On the charts, the USD/CAD price is facing resistance at the 30-SMA and has been struggling to break above for some time. Bears have been in control since the price broke below the SMA and the key 1.3750 level. However, they failed to make lower lows as bulls try to regain control.
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Price has retested the 30-SMA several times and could eventually break above. However, bulls must also break above 1.3750 to confirm a bullish takeover. However, at the moment, the bears are still ahead and the RSI is supporting the bearish momentum below 50. If the bears hold control, the price will retest the 1.3650 support level.
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