USD/CAD Weekly Forecast: Fed Cut and Oil Rally Trigger Bears

• Expectations of a Fed rate cut put pressure on the dollar.
• The Canadian dollar had a strong week as oil prices rose.
• Investors await US inflation data.

USD/CAD weekly forecast indicates a bearish trend. The dollar weakens on speculation of a Fed rate cut, while the loonie strengthens, driven by rising oil prices.

USD/CAD Ups and Downs

The USD/CAD pair had a bearish week, with the Canadian dollar defying the odds against the US dollar. As the week began, market turmoil amid fears of a US recession initially boosted the dollar before the trend reversed.

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However, data on service sector activity and jobless claims painted a different picture of a resilient economy. As a result, recession fears have diminished. However, expectations of a Fed rate cut remained high, weighing on the dollar.

On the other hand, the Canadian dollar had a strong week as oil prices rose. Meanwhile, Canadian employment numbers showed a mixed picture. More people lost their jobs, but the unemployment rate fell slightly.

Next week’s key events for USD/CAD

Next week, investors will focus on US data, including wholesale and consumer inflation and retail sales. These reports will have a significant impact on Fed rate cut expectations. In particular, economists expect the consumer price index to fall further to 2.9% in July. Meanwhile, the monthly figure could increase by 0.2% from the previous -0.1%.

If the report shows lower price pressure, it will strengthen bets for a 50 bps rate cut in September. On the other hand, if inflation surprises to the upside, markets could reduce the expected size of rate cuts. Meanwhile, retail sales will show the state of demand and how strong the American consumer is.

USD/CAD Weekly Technical Forecast: Price below 22-SMA, signaling bearish dominance

Technically, the USD/CAD price has broken below the 22-SMA, showing that the bears have taken control. Initially, the bulls were in control, pushing the price above the critical resistance level of 1.3802. Although the price rose, the bulls were unable to sustain the move, allowing the bears to take over. As a result, the price fell below the key level of 1.3802.

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With bears in the lead, USD/CAD could drop to retest the 1.3601 support level. A break below this level would confirm a new downtrend. Otherwise, the price will remain consolidated with support at 1.3601 and resistance at 1.3802.

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