- Trading was thin on Thursday as the US observed the Thanksgiving holiday.
- The core PCE price index increased by 0.3%, in line with expectations.
- The US economy expanded by 2.8% as expected.
The USD/CAD forecast indicates a rebound in the Canadian dollar stemming from the easing US dollar and slight gains in crude oil prices. However, the uptrend remains intact as traders anticipate Trump’s tariffs to boost the US economy.
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Trading was thin on Thursday as the US observed the Thanksgiving holiday. However, in the previous session, the Canadian dollar recovered amid speculation that Canada could avoid the full impact of Trump’s tariffs through negotiations.
The likelihood of a 25% tariff on Canadian goods weighed on the loonie since Canada exports nearly 75% of its goods to the US. Tariffs would reduce demand for these goods and hurt the economy. However, experts believe Trump might be ready to negotiate better trading terms.
Meanwhile, the greenback fell on Wednesday as Treasury yields eased after the US inflation report. The core PCE price index increased by 0.3%, in line with expectations. As a result, markets were more confident that the Fed would implement another rate cut in December. If inflation is behaving exactly as expected, policymakers will be confident enough to vote for a 25-bps rate cut next month.
A separate report revealed that the US economy expanded by 2.8% as expected. Moreover, unemployment claims came in slightly lower than expected at 213,000. A rate cut in December might weaken the dollar. However, the long-term outlook remains bright as markets expect the Trump administration to increase economic growth and inflation.
USD/CAD key events today
Market participants do not expect any key reports from the US or Canada. Moreover, the pair might have a slow day due to the US Thanksgiving holiday.
USD/CAD technical forecast: Growing bearish momentum
On the technical side, the USD/CAD price is pulling back after failing to breach the 1.4100 resistance level. Nevertheless, the price still trades above the 30-SMA with the RSI over 50, supporting a bullish bias.
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From the price action on the chart, it is clear that bears are getting stronger. At the same time, while the price has made higher highs, the RSI has made lower ones. Consequently, there is a bearish divergence that could signal a looming reversal. However, to confirm this, bears must break below the 1.3951 support and the 30-SMA.
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