- The dollar was higher on Thursday after weak trading in the previous session.
- The Fed remained somewhat hawkish despite the recent shift in economic data.
- API data revealed a rise in crude oil inventories.
The USD/CAD outlook is bearish, but the pair rose slightly ahead of US employment and business activity data, which could provide some insight into the outlook for a rate cut. Meanwhile, the Canadian dollar retreated slightly against oil on signs of weak demand for the fuel.
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The dollar was higher on Thursday after weak trading in the previous session due to the US holiday. Apart from soft retail sales data, it was a quiet week in the US, with investors now looking forward to jobless claims and PMI data.
In particular, there is more clarity about the US economy and monetary policy. Investors are more confident that the economy is heading south and that inflation is cooling. The retail sales report and Q1 GDP are some indicators of weaker economic demand. Meanwhile, consumer and producer price indices showed a decline in price growth. Consequently, the chances of a rate cut in September have increased.
However, the confusion is that the Fed has remained somewhat hawkish despite the recent shift in economic data. Policy makers are likely to be more cautious this time around in case the economy surprises again and returns to growth as it was at the start of the year. As a result, they forecast just one rate cut this year. However, this may change depending on incoming data.
Meanwhile, the Canadian dollar is almost worthless after a recent surge amid rising oil prices. However, oil retreated slightly after API data revealed a rise in crude inventories.
USD/CAD Key Events Today
USD/CAD Technical Outlook: Bears must confirm reversal below 1.3700
On the technical side, the USD/CAD price broke below its bullish trend line after showing signs of a reversal. Furthermore, it is trading below the 30-SMA with the RSI in bearish territory below 50. This new bias was created after the price made a bearish candle just above the SMA. This was a sign that the bears had gained momentum and that sentiment had changed. Accordingly, the price fell below its bullish trend line.
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However, the decline was stopped at the key level of 1.3700. This may lead to a retest of the recently broken trend line before the downtrend resumes. Bears will confirm the new direction when the price breaks below 1.3700.
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