- The Bank of Canada cut interest rates by 50 basis points on Wednesday.
- Oil rose nearly 1% early Thursday after Hezbollah hit Israel with missiles.
- The dollar remained steady as market participants awaited the November US presidential election.
The USD/CAD forecast shows a pullback after the pair made new highs. The Canadian dollar fell to an 11-week low on Wednesday after the Bank of Canada cut borrowing costs by 50 basis points. However, it recovered on Thursday as oil prices rose amid heightened tensions in the Middle East.
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The Bank of Canada cut interest rates by 50 basis points on Wednesday, as expected. Canada’s central bank remains the most aggressive among its peers, weighing heavily on the Canadian dollar. The rate cut pushed the Canadian currency to an 11-week low against the US dollar.
However, the rout rebounded on Thursday as missile exchanges in the Middle East lifted oil prices. Oil rose nearly 1% early Thursday after Hezbollah hit Israel with missiles. War rages on despite calls for a ceasefire. Therefore, the risk of escalation will maintain support for oil and the CAD.
Meanwhile, the dollar remained steady as market participants awaited the November US presidential election. Uncertainty about the possible outcome is sending more and more investors into safe assets like the dollar and gold.
At the same time, traders are expecting more economic data that will continue to shape the outlook for a Fed rate cut. Claims for the unemployed will show the state of the labor market. Meanwhile, PMI data will indicate the state of business activity in the manufacturing and services sectors. A resilient economy will reduce bets on a November cut, which could mean a pause. On the other hand, the weakness will solidify bets for two more rate cuts before the end of the year.
USD/CAD Key Events Today
- Claims for the unemployed
- Flash Manufacturing PMI
- Flash Services PMI
USD/CAD Technical Forecast: Bulls are exhausted near resistance at 1.3825
From the technical side, USD/CAD the price challenges the 30-SMA support line. The bulls recently made a new high in the uptrend, but again failed to sustain a move above the resistance level at 1.3825. Moreover, even though the price made a higher high, the RSI continued to move lower, showing a bearish divergence.
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A divergence indicates exhaustion in the uptrend, which could allow the bears to take over. If the bears break below the SMA, the price is likely to target the 1.3750 support level. Moreover, USD/CAD could start a downtrend.
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