- The Canadian dollar strengthened amid relief over Trump’s soft approach to tariffs.
- The US released softer-than-expected business activity data.
- The Fed will likely keep rates unchanged while the BoC lowers.
The USD/CAD forecast indicates increasing bullish sentiment as market participants gear up for monetary policy meetings in the US and Canada. The Fed will likely keep rates unchanged and remain cautious. On the other hand, economists expect the Bank of Canada to lower borrowing costs by 25-bps.
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Last week, the Canadian dollar strengthened amid relief over Trump’s soft approach to tariffs. The US president had many occasions where he could have emphasized and given more guidance on his tariff proposals. However, he remained mostly silent. Moreover, there is a likelihood he will not impose any tariffs on China.
The loonie also strengthened as the week ended with downbeat US economic data. The dollar dropped after the US released softer-than-expected business activity data. Service sector business activity fell sharply, with the PMI dropping from 56.8 to 52.8.
However, as the week ended, the market focus shifted to the looming policy meetings in the US and Canada. The Fed will likely keep rates unchanged while the BoC lowers. Such an outcome might strengthen the dollar and weaken the loonie, leading to a rally in the USD/CAD price. However, traders will also focus on the messaging for future policy moves.
USD/CAD key events today
Market participants are not looking forward to high-impact economic reports from the US or Canada today. Therefore, the price will likely consolidate.
USD/CAD technical forecast: Consolidation continues
On the technical side, the USD/CAD price has maintained its consolidation between the 1.4300 support and the 1.4450 resistance levels. A spike in volatility last week failed to trigger a breakout. Currently, volatility has fallen back to normal levels.
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The price trades above the 30-SMA within the range, with the RSI slightly above 50, suggesting a bullish bias. Therefore, bulls might soon challenge the range resistance. A strong break above the 1.4450 resistance will confirm a bullish breakout. Such an outcome would allow USD/CAD to reach the 1.4551 resistance level.
Moreover, if the price starts making higher highs and higher lows, it will confirm a new bullish trend. On the other hand, there is still a chance the price will remain in consolidation. If the 1.4450 resistance holds firm, bears will return to revisit the range support level.
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