- The USD/CAD weekly forecast shows a fragile Canadian dollar.
- US consumer inflation came in slightly softer than expected.
- The Canadian dollar has remained fragile since Trump imposed higher tariffs on Canada.
The USD/CAD weekly forecast shows a fragile Canadian dollar as tariffs reshape the outlook for the economy.
Ups and downs of USD/CAD
The USD/CAD price had a bullish week as the dollar gained after hotter-than-expected wholesale inflation figures. Initially, the loonie strengthened after US consumer inflation came in slightly softer than expected. Fed rate cut bets soared, and the dollar collapsed against most of its peers. However, this changed on Thursday when PPI numbers beat estimates.
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Moreover, the Canadian dollar has remained fragile since Trump imposed higher tariffs on Canada. Already, employment has slowed as companies anticipate the future. The tariffs might undo some of the work the BoC has done by lowering interest rates. Therefore, it might pressure policymakers to consider more rate cuts.
Next week’s key events for USD/CAD
Next week, market participants will focus on crucial inflation and retail sales data from Canada. Meanwhile, the US will release the FOMC minutes, showing what went into the last meeting. Additionally, traders will pay attention to the Jackson Hole Symposium where several policymakers will be speaking.
Canada’s inflation report will shape the outlook for Bank of Canada rate cuts. If inflation remains cool, the central bank might continue its pause. However, with Trump’s tariffs, policymakers might be forced to focus more on growth.
USD/CAD weekly technical forecast: Looking to rally after range breakout
On the technical side, the USD/CAD price is bouncing higher after retesting a major support zone. The zone comprises of the 1.3750 level and the 22-SMA. Moreover, the bullish bias is strong since the price trades above the SMA with the RSI above 50.
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Initially, the price paused to trade in a sideways move between the 1.3575 support and the 1.3750 resistance. Here, the previous downtrend stopped, and the RSI made a bullish divergence, confirming that bearish momentum was fading. As a result, bulls had a chance to take control.
The price broke out of its consolidation with bulls in the lead. Moreover, it pulled back to retest the recently broken range resistance and the 22-SMA. To confirm a new uptrend, bulls must now start making higher highs and lows. Therefore, the price might retest the 1.4000 key resistance level.
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