USD/CAD Weekly Forecast: Aggressive rate cut odds fade

• The US NFP report showed stronger than expected job growth.

• Powell dashed hopes for a massive rate cut.

• The dollar gained on asylum demand as tensions in the Middle East escalated.

The USD/CAD weekly forecast favors more upside as the likelihood of an aggressive Fed easing cycle recedes after strong NFP data.

USD/CAD Ups and Downs

The USD/CAD pair had a bullish week as the greenback rallied due to a number of factors. In particular, US economic data revealed a resilient economy, with the labor market showing unexpected strength. The NFP report showed stronger than expected job growth. Meanwhile, the unemployment rate fell, indicating tight labor market conditions.

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At the same time, Powell dashed hopes for a massive rate cut, saying the Fed would cut rates by 25 basis points. Additional support for the dollar came from asylum demand as tensions in the Middle East escalated.

Next week’s key events for USD/CAD

Market participants will be watching US inflation data and minutes from the FOMC policy meeting next week. Meanwhile, Canada will release employment figures.

The US consumer inflation report will cause considerable volatility as it shapes the outlook for Fed rate cuts. Economists expect the monthly figure to rise 0.1 percent after a 0.2 percent rise in the previous month. Meanwhile, the annual figure could fall from 2.5% to 2.3%. Weaker-than-expected numbers will boost bets for a massive Fed rate cut in November. On the other hand, if inflation rises, the Fed is likely to maintain a gradual pace of rate cuts. Meanwhile, Canada’s employment numbers will weigh on the Bank of Canada’s next move.

USD/CAD Weekly Technical Forecast: Bulls take control but face resistance

Technically, the USD/CAD price has crossed the 22-SMA, indicating a change in sentiment. Bulls took control after price found support at 1.3425. Furthermore, the RSI showed a bullish divergence, indicating weakness in the previous downtrend.

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Although the bulls have taken control, they face a solid barrier at the 1.3600 resistance level. Therefore, if the price fails to break this resistance, it could start consolidating between the 1.3425 support and the 1.3600 resistance or continue the previous downtrend.

On the other hand, a break above the 1.3600 resistance would make a higher high, confirming a new bullish trend. However, the price should remain above the SMA and make several higher highs and lower lows. Consequently, it could bounce back and break above the 1.3725 resistance level.

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