- The Bank of Canada last week became the first G7 central bank to cut interest rates.
- Investors are pricing in a 55% chance the Bank of Canada will cut rates in July.
- Demand for the safe-haven dollar increased with the recent announcement of snap elections in France.
USD/CAD price analysis points to a bullish trend as the Canadian dollar depreciates after the BoC reaffirmed its intention to cut rates. The loonie was also weighed down by a stronger dollar, which rose on safe-haven demand.
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Namely, the Bank of Canada became the first G7 central bank to cut interest rates last week, weakening the Canadian dollar. Moreover, on Thursday, Bank of Canada Deputy Governor Sharon Kozicki hinted at further rate cuts if inflation continues to ease. However, she noted that political decisions will largely rely on the received data. Currently, investors are pricing in a 55% chance that the Bank of Canada will cut rates in July.
Meanwhile, the dollar was the top performer on Friday as safe-haven demand was boosted by the recent announcement of a snap election in France. At the same time, investors continued to bet on the Fed’s forecast of just one rate cut in December despite cooling inflation.
Fed policymakers sounded more dovish than expected on Wednesday, stressing the need for patience with interest rate cuts. Fed Chairman Powell noted that the US economy remains robust despite lower inflation, a more hawkish assessment than the market expected after softer consumer inflation data.
However, investors are betting there will be two rate cuts this year. Notably, jobless claims rose last week and wholesale inflation fell more than expected.
USD/CAD Key Events Today
- Prelim UoM consumer sentiment
USD/CAD Technical Price Analysis: Resistance around 1.3780
On the technical side, the USD/CAD price has broken above the 30-SMA and is approaching the resistance level at 1.3780. At the same time, the RSI broke above 50 and is now supporting a solid bullish momentum. The move comes after the price encountered a solid barrier at 1.3780 and pulled back to retest the recently broken channel resistance and the 1.3700 level.
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After the pullback, the bulls will look for a new high. This means that the price could challenge the resistance level of 1.3780 soon. A break above this level would strengthen the bullish bias and confirm the bullish trend with a higher high.
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