USD/CAD Weekly Forecast: High Odds for a 25bps Cut in September

• The data showed that US wholesale inflation in July was weaker than expected.

• The US CPI figure fell to 2.9% from 3.0%.

• The dollar got a brief reprieve when retail sales rose 1.0%.

The USD/CAD weekly forecast is tilted amid growing confidence in a quarter-point September Fed interest rate cut.

USD/CAD Ups and Downs

The USD/CAD pair had a bearish week with US data as the main catalyst. Most US economic reports weighed on the dollar during the week, strengthening the Canadian dollar. As the week began, data showed July US wholesale inflation was weaker than expected.

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Meanwhile, the headline CPI figure fell to 2.9% from 3.0%. As a result, investors have raised the likelihood of a Fed rate cut in September. However, the dollar got a brief reprieve when retail sales rose 1.0%. However, expectations of a Fed rate cut kept gains under control.

Next week’s key events for USD/CAD

Next week, traders will pay attention to Canadian inflation and retail sales data. Meanwhile, the US will publish the minutes of the FOMC meeting. At the same time, investors will pay close attention to Powell’s speeches at the Jackson Hole Symposium.

Canada’s CPI fell 0.1% in the previous month. Inflation in the country has fallen in recent months, giving politicians confidence to cut interest rates. At the same time, Canada’s economy has slowed, particularly in the labor market.

As a result, investors expect the Bank of Canada to cut rates in September. Another cooler inflation report will support those expectations. Meanwhile, the FOMC minutes could contain clues about the Fed’s next move. In addition, Powell’s speeches will show whether the central bank is ready to cut in September.

USD/CAD Weekly Technical Forecast: Bears meet 1.3700 barrier

Technically, the USD/CAD price is trading below the 22-SMA with RSI below 50, indicating a bearish trend. The trend recently reversed when the price reached the 1.3900 resistance level. Bears have taken control by pushing the price below the 30-SMA. However, the decline stopped at the 1.3700 support.

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Here, the bulls could re-emerge to retest the recently broken 22-SMA before the downtrend continues. A break below the 1.3700 support will allow the bears to reach the 1.3601 level. Moreover, the price would go lower, confirming the downtrend. On the other hand, if the SMA fails to hold the resistance, the price will go up to the 1.3900 resistance.

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