• Fed rate cut expectations pressured the dollar.
• The Canadian dollar had a strong week as oil prices gained.
• Investors are awaiting US inflation data.

The USD/CAD weekly forecast points to a bearish trend. The dollar weakens on Fed rate cut speculation while the loonie strengthens, driven by rising oil prices.

Ups and downs of USD/CAD

The USD/CAD pair had a bearish week, with the Canadian dollar defying the odds to rise against the US dollar. When the week began, the market turmoil amid fears of a US recession initially boosted the dollar before the trend reversed.

However, data on service sector activity and jobless claims showed a different picture of a resilient economy. As a result, recession fears eased. However, Fed rate cut expectations remained high, pressuring the dollar.

On the other hand, the Canadian dollar had a strong week as oil prices gained. Meanwhile, Canada’s employment figures showed a mixed picture. More people lost jobs, but the unemployment rate fell slightly.

Next week’s key events for USD/CAD

Next week, investors will focus on US data, including wholesale and consumer inflation and retail sales. These reports will significantly impact Fed rate cut expectations. Notably, economists expect the Consumer Price Index to ease further to 2.9% in July. Meanwhile, the monthly figure could increase by 0.2% compared to the previous -0.1%.

If the report shows cooling price pressure, it will solidify bets for a 50 bps rate cut in September. On the other hand, if inflation surprises upside down, markets might reduce the expected size of rate cuts. Meanwhile, retail sales will show the state of demand and how strong the US consumer is.

USD/CAD weekly technical forecast: Price under 22-SMA, signaling bearish dominance

On the technical side, the USD/CAD price has broken below the 22-SMA, showing bears have taken control. Initially, bulls had control, pushing the price above the 1.3802 critical resistance level. Although the price made a higher high, bulls failed to maintain the move, allowing bears to take over. As a result, the price has fallen below the 1.3802 key level.

With bears in the lead, USD/CAD might fall to retest the 1.3601 support level. A break below this level would confirm a new downtrend. Otherwise, the price will remain consolidated with support at 1.3601 and resistance at 1.3802.

https://www.forexcrunch.com/blog/2024/08/10/usd-cad-weekly-forecast-fed-cut-and-oil-rally-trigger-bears/