- Inflation in Canada rose more than expected, dashing hopes for an early rate cut by the BoC.
- The US economy remained resilient, with strong retail sales.
- The Canadian dollar strengthened as oil prices rose.
The weekly USD/CAD forecast paints a slightly bearish picture, with the Canadian dollar riding a wave amid rising oil prices.
USD/CAD Ups and Downs
The pair had a bullish week. However, it closed well below its highs. During the week, investors had to evaluate data from the US and Canada. Inflation in Canada rose more than expected, dashing hopes for an early rate cut by the BoC. Meanwhile, the US economy remained resilient, with strong retail sales and a significant drop in initial jobless claims.
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However, the main driver of the pair at the end of the week was the rise in oil prices. The Canadian dollar was boosted by oil, leading the pair to close lower.
Next week’s key events for USD/CAD
The consensus among economists is that the Bank of Canada will keep its key overnight rate at 5.00% on January 24 and March. In addition, most economists expect the Bank of Canada to delay any key rate cut until at least June.
Meanwhile, in the US, investors are still struggling to predict when the Fed will start cutting interest rates. The US economy remains strong and next week’s GDP and core durable goods data will shed more light on the economy.
USD/CAD Weekly Technical Forecast: Eye Pull 22-SMA Support
On the technical side, USD/CAD is pulling back after encountering a strong resistance zone. However, the bias is bullish as buyers managed to push the price above the 22-SMA. They were taken when the downtrend stopped at the 1.3201 support level.
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However, the new bullish move stalled at the resistance zone consisting of the 0.5 fib level and the 1.3501 resistance level. Accordingly, there is a pullback that could reach support from the 22-SMA in the coming week. This will allow sellers to test a new bullish trend. If buyers are ready to push the price above the 1.3501 level, then the price will respect the 22-SMA support.
However, if this was a deep retracement in a downtrend, then the bears could continue the downtrend next week. In this case, the price would break below the 22-SMA to retest support at 1.3201.
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