• The US consumer inflation report surprised to the downside.
• US retail sales beat forecasts at 0.0%.
• Price pressures in Canada eased from 2.9% to 2.7% in June.

The USD/CAD forecast has turned bearish as the dollar resumes its decline due to higher expectations for the Fed’s September rate cut. Meanwhile, although the Canadian dollar is strengthening, investors are more convinced that the Bank of Canada will cut rates in July.

The US dollar started falling last week after the consumer inflation report surprised to the downside. As a result, markets moved to fully price in the first US cut in September. At the same time, Powell sounded more confident about the decline in price pressures on Monday.

As a result, recent upbeat economic figures have failed to trigger a significant rally in the dollar. Notably, data on Tuesday revealed that retail sales beat forecasts at 0.0%. Economists had expected weaker consumer spending, with sales at -0.3%. After the report, the dollar briefly rallied before resuming its downtrend, strengthening the loonie.

Meanwhile, in Canada, inflation figures on Tuesday increased the chances of another Bank of Canada rate cut in July. Price pressures eased from 2.9% to 2.7% in June, weighing on the Canadian dollar. Furthermore, the figure was smaller than the forecast of 2.8%. After the report, investors increased the likelihood of a rate cut in July to 90%. This would be the second BoC rate cut to spur economic growth. Moreover, it would indicate strong confidence among policymakers that inflation will continue falling.

USD/CAD key events today

There won’t be any key events from Canada or the US. Consequently, the pair might consolidate.

USD/CAD technical forecast: 0.618 Fib triggers pullback towards 30-SMA

On the technical side, the USD/CAD price is retreating after a failed attempt to trade above the 0.618 Fib retracement level. However, the bullish bias remains intact since the price sits above the 30-SMA and the RSI exceeds 50.

Consequently, the retreat might pause at the SMA line, which acts as support in a bullish trend. Sentiment will remain bullish as long as the price stays above the SMA. Therefore bulls might break above the Fib level to retest the 1.3750 resistance level. Meanwhile, a break below the SMA will signal a reversal that might revisit the 1.3600 support level.

https://www.forexcrunch.com/blog/2024/07/17/usd-cad-forecast-dollar-tumbles-as-feds-sep-rate-cut-looms/