- The data revealed a larger-than-expected drop in inflation in Canada.
- The dollar initially weakened after the FOMC meeting.
- Next week, traders will be able to assess GDP data from the US and Canada.
The weekly USD/CAD forecast remains bullish, buoyed by the relentless strength of the US economy shown in the latest data.
USD/CAD Ups and Downs
After a fluctuating week, USD/CAD ended and the dollar ended the week on the front. As the week began, data revealed a larger-than-expected drop in Canadian inflation, leading to increased bets for a rate cut. As a result, the Canadian dollar weakened.
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Meanwhile, the dollar initially weakened after a dovish FOMC meeting in which Powell argued that inflation was falling. However, as the week ended, it recovered amid upbeat US economic data, allowing USD/CAD to close on a bullish candle.
Next week’s key events for USD/CAD
Next week, traders will be able to assess GDP data from the US and Canada. Furthermore, there will be a report from the US on durable goods orders. GDP reports for both countries will have a big impact on USD/CAD as they reveal the impact of higher interest rates. Therefore, lower-than-expected readings could put pressure on the Fed and the Bank of Canada to cut interest rates. On the other hand, optimistic readings would allow central banks to keep interest rates higher for longer.
Meanwhile, the US durable goods orders report will show the state of manufacturing and consumer spending in the country. This will also show whether higher interest rates are affecting the economy. Therefore, the results will affect rate cut bets.
USD/CAD Weekly Technical Forecast: Weak bullish momentum faces 1.3600 barrier
On the technical side, USD/CAD has been trading in a shallow and tight bullish channel since mid-January. Although the bulls tried to make higher highs, the price is holding close to the 22-SMA. At the same time, the RSI remained close to 50 and did not touch the overbought region. This is a sign that although the bulls are in control, they have weak momentum.
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A shallow bullish move now faces strong resistance at the key 1.3600 level. Given the weak bullish momentum, the price may not be able to break above. This would allow the bears to take over by breaking out of the channel. If the bears take control, the price is likely to fall to 1.3200.
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