• USD/CAD outlook is bullish as Canada’s retail sales fell by 0.8% in May.

• The BoC will likely cut rates by 25 basis points on Wednesday.

• A Trump win would further weaken the Loonie.

The USD/CAD outlook shows bullish optimism as the Loonie falls amid rising expectations for a Bank of Canada rate cut in July. Meanwhile, the dollar was steady despite new developments in the US political scene.

The Canadian dollar plunged last week after economic reports increased the likelihood of a second BoC rate cut in July. Notably, inflation eased more than expected, showing a drop in price pressures. At the same time, data on Friday showed that retail sales fell by 0.8% in May from April. This was a poorer outcome than the forecast of a 0.6% decline.

The Bank of Canada became the first major central bank to lower borrowing costs. Notably, inflation was behaving, and the economy was declining. Therefore, policymakers were confident and under pressure to ease the burden of high rates on the economy. Since this trend has continued, the central bank will likely cut rates by 25 basis points on Wednesday. Lower rates in Canada will leave the Canadian dollar vulnerable.

At the same time, US President Joe Biden dropped out of the presidential race on Sunday. Still, bets show there is a high chance Trump will win. Such an outcome would further weaken the Loonie. If Trump wins, he might increase tariffs on US imports. Notably, the US receives about 75% of Canada’s exports. Therefore, tariffs would significantly affect Canada’s economy.

Elsewhere, the US dollar remained steady as investors awaited more clues on the Fed’s policy outlook. The next big event will be Friday’s release of the core PCE price index.

USD/CAD key events today

Neither Canada nor the US will release major reports. Therefore, the pair might consolidate.

USD/CAD technical outlook: Bullish momentum revisits 1.3750 resistance

On the technical side, the USD/CAD price is in a solid bullish trend, with the price well above the 30-SMA and the RSI near the overbought region. However, bulls are approaching strong resistance at the 1.3750 level. If they are strong, the price will breach this level to retest the 1.3800 key psychological level.

On the other hand, if bulls fail to breach the resistance, the price will pull back to retest the 30-SMA or the 1.3675 support level.

https://www.forexcrunch.com/blog/2024/07/22/usd-cad-outlook-bulls-gather-traction-ahead-of-boc/