- Analysts expect headline US inflation to slow to 0.3% in March.
- The probability of a Fed tapering in June rose to 58%.
- Traders were preparing for the Bank of Canada’s policy meeting.
The USD/CAD forecast horizon appears to be shrouded in bearish sentiment as the dollar weakens as interest rate cut bets rise ahead of the US inflation report. At the same time, the Canadian dollar strengthened due to the increase in oil prices.
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Investors positioned themselves ahead of the US consumer inflation report. These numbers will determine whether the Fed cuts interest rates in June. Analysts expect the headline figure to slow to 0.3% in March.
Notably, rate cut bets rose ahead of the report, with the probability of a June cut at 58%. The figure is up from 52 percent on Monday and shows investors expect inflation to slow. At the same time, markets are now predicting a 74 basis point decline in 2024.
On the other hand, the Canadian dollar strengthened on Wednesday as oil prices recovered. The deadlock in the Gaza ceasefire has caused a lot of concern about oil supplies, which has pushed up prices.
At the same time, traders were preparing for the Bank of Canada’s policy meeting later in the day. The BoC is likely to keep rates at 5%. However, traders expect a more dovish meeting after recent economic data.
Inflation in Canada has slowed significantly. Similarly, the labor market weakened, reflecting weaker economic demand. As a result, there is more pressure on the central bank to lower interest rates. Therefore, policymakers could signal the start of cuts in June.
USD/CAD Key Events Today
- US Consumer Price Index Report
- BoC monetary policy meeting
- FOMC meeting minutes
USD/CAD Technical Forecast: 30-SMA breaks down to channel support
On the technical side, the USD/CAD price has paused at the 30-SMA support. Similarly, the RSI fell to retest the key level of 50. However, on a larger scale, the price is in a shallow uptrend that continues to cut through the SMA.
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Furthermore, it is trading in a bullish channel with clear support and resistance. Therefore, since the price has recently touched resistance, there is a good chance that it will fall to retest the support of the channel. Consequently, the bears could target the 1.3500 level. However, the price must fall below the SMA for this to happen. Otherwise, it could rise to a new high.
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