• Upbeat consumer confidence data from the US sent the dollar soaring.

• Canada’s GDP fell from 0.2% to 0.0% on a monthly basis.

• Markets are pricing a 60% chance of a rate cut in Canada on coming Wednesday.

The USD/CAD weekly forecast shows more downside potential as there is a high chance that the Bank of Canada will cut rates next week, well ahead of the Fed.

Ups and downs of USD/CAD

USD/CAD fluctuated throughout the week but ended lower after poor US inflation data. When the week started, upbeat consumer confidence data from the US sent the dollar soaring against the Canadian dollar. However, the trend changed when, on Thursday, US data revealed a drop in GDP from 1.6% to 1.3% in Q1.

Similarly, Canada’s GDP fell from 0.2% to 0.0% on a monthly basis. Therefore, the Bank of Canada is under more pressure to cut rates next week. The major catalyst for the week was the US core PCE index, which revealed an unexpected decline in inflation from 0.3 to 0.2%. This raised bets that the Fed will cut rates in September.

Next week’s key events for USD/CAD

Next week, investors will focus on the Bank of Canada policy meeting and employment data from Canada. At the same time, the US will release PMI data and the nonfarm payrolls report. The BoC policy meeting comes after much speculation on the central bank’s rate-cutting cycle. On coming Wednesday, markets are pricing a 60% chance of a rate cut in Canada.

Meanwhile, the NFP report will give more clues on the outlook for rate cuts in the US as it will show the state of the labor market.

USD/CAD weekly technical forecast: Bears approach solid support at 1.3601

On the technical side, the USD/CAD price has broken below its bullish trendline and is approaching the 1.3601 support level. This comes after the bullish trend rose to the 1.3803 resistance level.

Although sentiment has shifted to bearish, the move lower has been choppy, showing it might be a corrective move. If it is, the price will likely bounce off the 1.3601 to retest the 1.3803 resistance level.

A break above this resistance would make a higher high, confirming a continuation of the bullish trend. However, if bears make a stronger move in the coming week, the price could break below 1.3601 to retest the 1.3400 support level.

https://www.forexcrunch.com/blog/2024/06/01/usd-cad-weekly-forecast-boc-poised-for-early-rate-cut/