- A decline in Canada’s retail sales led to the weakening of the Canadian dollar.
- Oil prices settled lower following the release of two US hostages by Hamas.
- The Bank of Canada will likely maintain its interest rates at 5.00% for at least six months.
The USD/CAD weekly forecast reveals a bullish mood among investors. They are confident that the Bank of Canada will keep its rates unchanged, despite the rising inflation and economic recovery. This means that the Canadian dollar will remain under pressure, while the US dollar will enjoy the support of the Fed’s tapering plans and strong growth prospects.
Ups and downs of USD/CAD
USD/CAD ended the week slightly higher as the Canadian dollar weakened against the dollar. Notably, a decline in Canada’s retail sales led to the weakening of the Canadian dollar. It solidified expectations that the Bank of Canada will maintain its current interest rates next week.
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Additionally, the Canadian dollar weakened as oil prices settled lower. This decline followed the release of two US hostages by the Islamist group Hamas in Gaza. Consequently, there is hope that the Israeli-Palestinian crisis might de-escalate without spreading and disrupting oil supplies.
Next week’s key events for USD/CAD
The market participants will keenly monitor the BoC policy meeting next week. They will also receive data from the US, including GDP and durable goods orders. Notably, a Reuters poll of economists suggests that the Bank of Canada will maintain its interest rates at 5.00% for at least six months.
Until recently, the possibility of a 0.25% rate increase on October 25 was high. However, a recent report indicating lower-than-anticipated inflation in September has weakened that possibility.
Moreover, the economy is exhibiting strain from 475 basis points in rate hikes since early 2022, motivating policymakers to adopt a wait-and-see approach.
USD/CAD weekly technical forecast: Bullish bias prevails.
The bias for USD/CAD on the daily chart is bullish. The price is above the 22-SMA, and the RSI is positioned above 50, showing a bullish move. However, the price has paused between the 1.3600 support and the 1.3701 resistance level. Bears and bulls show almost equal strength as the price oscillates in this range area.
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However, bulls have the upper hand since this is happening above the 22-SMA. Therefore, the price will likely break above the 1.3701 resistance level in the coming week. Such a move would lead to a retest of the 1.3800 resistance level. Moreover, this would signal a continuation of the bullish trend as the price would make a higher high.
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