- The Bank of Canada is likely to remain aggressive.
- Rising oil prices supported the madman.
- The economy grew by 2.8% in the third quarter.
The USD/CAD forecast points to further weakness in the Canadian dollar amid an aggressive Canadian bank. Meanwhile, the dollar weakened slightly after data showed weaker-than-expected US economic growth.
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The Bank of Canada is likely to remain aggressive after the governor predicted more rate cuts. Canada’s central bank cut borrowing costs by 50 basis points at its last meeting amid pressure to revive economic growth. Tiff Macklem noted Wednesday that there will be more to come if the economy performs as expected. An aggressive rate cut will keep pressure on the Canadian dollar, allowing USD/CAD to rise.
However, rising oil prices supported the madman. Oil rose in the previous session on a larger-than-expected drop in US crude inventories, which pointed to solid demand. At the same time, the likelihood of a delay in OPEC+’s planned production increase helped boost prices.
Meanwhile, the US dollar remained fragile after mixed data in the previous session. Notably, the ADP employment report revealed an increase of 233,000 private jobs in October. Economists had expected a smaller addition of 110,000 jobs.
However, a separate report showed that the economy grew by 2.8% in the third quarter, which was less than the forecast of 3.0%. Weak economic demand supported expectations of a Fed rate cut in November.
The next major reports include core PCE and the non-farm payrolls report. The PCE report will show the state of inflation, influencing the outlook for future Fed policy moves. Meanwhile, the NFP report is likely to show slower job growth than last month, firming bets for a November rate cut. Meanwhile, Canada will release its GDP report.
USD/CAD Key Events Today
- Canada GDP m/m
- Core US price index PCE m/m
- US employment cost index c/c
- US unemployment claims
USD/CAD Technical Forecast: Weakening Momentum
From the technical side, USD/CAD the price is climbing higher, above the 30 SMA, indicating a bullish bias. The bulls have set their sights on the key level of 1.3950. However, the momentum fell as the price made a high close to the resistance level at 1.3825. The RSI has made a bearish divergence, which is a reversal signal.
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If the bulls regain momentum, the uptrend will continue. Otherwise, the price could fall below the 30-SMA to retest the 1.3825 level.
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