- US retail sales were weaker than expected, pointing to lower consumer spending.
- US continuous claims hit new highs, pointing to increased unemployment.
- Canada will release data on inflation and GDP, showing the state of the economy and providing clues about the Bank of Canada’s rate cut prospects.
The USD/CAD weekly forecast points south as market participants expect the Fed to cut rates starting this September.
USD/CAD Ups and Downs
The USD/CAD pair had a red week, ending lower as the dollar fell after a mix of data. Markets focused on retail sales, employment and PMI data. Retail sales were weaker than expected, indicating lower consumer spending. Consequently, Fed rate cut expectations have risen. Furthermore, although initial jobless claims fell, continuous claims hit new highs, indicating increased unemployment.
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However, PMI data showed strong business activity in the US, as the manufacturing and service sectors expanded more than expected.
Next week’s key events for USD/CAD
Next week, Canada will release data on inflation and GDP, which will show the state of the economy and provide clues about the Bank of Canada’s rate cut prospects. Meanwhile, the US will release data on GDP and durable goods orders.
Last week, the Bank of Canada became the first major central bank to cut interest rates. Investors now want to see if this cycle will continue. A stronger-than-expected easing of inflation could give policymakers more confidence in lower borrowing costs. However, the jump could lead to a pause as the central bank adjusts accordingly.
In the US, the GDP report could put further pressure on the Fed to start cutting interest rates as the last report showed a huge drop from 3.4% to 1.3% growth.
USD/CAD Weekly Technical Forecast: Bears struggle to reverse trend
On the technical side, the USD/CAD price is on the verge of breaking below the 22-SMA. Such an outcome would indicate a change in mood. At the same time, the RSI is about to dive into bearish territory below 50.
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The price recently made a sharp break below its bullish trend line, indicating that the bears are ready to reverse the trend. However, to confirm a reversal, the price must break below the 1.3605 support level to make a lower low. If that happens, the path for the bears to retest the 1.3400 support level will be clear.
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