USD/CAD Forecast: Dollar bounces back after BoJ disappointment

• The BoJ held rates unchanged on Friday and failed to provide clear guidance on future rate hikes.

• Market participants are pricing in a 49 percent chance of another massive Fed rate cut in November.

• Canadian sales rose more than expected in July.

The USD/CAD forecast shows a rebound in the dollar bull following a disappointing Bank of Japan policy meeting. As a result, the Canadian dollar gave up some of last week’s gains as sales data revealed resilient consumer spending.

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The Bank of Japan kept interest rates on hold on Friday and gave no clear guidance on future rate hikes. As a result, investors were disappointed, which led to a decline in the yen. This, in turn, boosted the US dollar, which rose against most peers.

The rebound lifted the greenback from lows hit after the FOMC policy meeting. The US Federal Reserve cut borrowing costs by 50 basis points, beating forecasts by 25 basis points. In addition, policymakers are forecasting more interest rate cuts, with market participants predicting a 49% chance of another massive cut in November. The greenback could come under more pressure if the Fed continues its aggressive easing. However, this will depend on incoming data, which could change the outlook.

Meanwhile, the Canadian dollar hit fresh highs on Friday after data showed Canadian sales rose more than expected in July. Notably, retail sales rose 0.9 percent versus economists’ forecast of 0.6 percent. The data eased concerns that the economy was in rapid decline.

However, it had little impact on rate cut expectations. The Bank of Canada may increase the size of interest rate cuts after the Fed’s massive tapering.

Key USD/CAD Events Today

• US flash manufacturing PMI
• US PMI flash services

USD/CAD Technical Forecast: Bulls break from channel support

Technically, the USD/CAD price is moving higher after meeting bullish channel support. The price has recently taken a sharp decline after meeting channel resistance. However, he stopped at the stand and is now looking up. The RSI is trading slightly above 50, supporting bullish momentum.

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However, the price is still in the lower part of the 30-SMA, which is a big challenge. However, as the price has been in a shallow uptrend, it may soon break above the SMA and the 1.3600 resistance to review the 1.3650 level. On the other hand, if the SMA holds firm, the bears could break out of the ascending channel and reverse the trend.

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