- The Canadian dollar strengthened due to rising oil prices.
- American consumer confidence rose and the economy expanded faster than expected.
- The Canadian economy did not show expansion, missing expectations for growth of 0.1%.
USD/CAD weekly forecast leans bullish amid economic differences between Canada and the US. A correction in oil prices could also affect the lunatic.
USD/CAD Ups and Downs
The USD/CAD pair fell this week, but closed well above its lows. The drop came as the Canadian dollar strengthened due to rising oil prices. Oil rose amid heightened tensions in the Middle East.
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However, economic data from the US and Canada supported the upward trend. It is noticeable that American consumer confidence has increased and the economy has expanded faster than expected. At the same time, the core PCE price index remained stable at 0.2%. These reports supported the strong dollar.
On the other hand, the Canadian economy did not show expansion, missing expectations for growth of 0.1%. Consequently, the Canadian dollar weakened.
Next week’s key events for USD/CAD
Next week, the US will release PMI data on manufacturing and employment. Similarly, Canada will release its employment report. In addition, investors will be watching the Bank of Canada’s policy meeting on Wednesday.
Employment figures in both countries will shape the outlook for future policy decisions by the Fed and the BoC. Central banks are beginning to focus more on growth as inflation approaches targets. So policymakers want to see if demand in the labor sector is falling. Namely, the labor market drives a large part of most economies. Consequently, signs of weakness will pressure central banks to reduce borrowing costs.
Meanwhile, investors expect another rate cut when the BoC meets.
USD/CAD Weekly Technical Forecast: Sharp decline pauses with 1.3400 in sight
From the technical side, USD/CAD there is a price continued its decline below the critical level of 1.3600, indicating a solid bearish bias. The price is trading well below the 22-SMA and the RSI is near the oversold region, indicating that the bears are in the lead.
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However, the decline stalled before reaching the next support level at 1.3400. This is a sign that the bears are exhausted after such a steep decline. Therefore, they need a short break before continuing lower. A pullback could bring back the 1.3600 or 22-SMA level. However, as the bearish bias is strong, the price could eventually fall to the 1.3400 support level.
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