• Data revealed that July’s US wholesale inflation was softer than expected.

• The headline US CPI figure eased to 2.9% from 3.0%.

• The dollar got a brief respite when retail sales jumped by 1.0%.

The USD/CAD weekly forecast leans bearish amid increasing confidence in a quarter-point September Fed rate cut.

Ups and downs of USD/CAD

The USD/CAD pair had a bearish week, with US data as the primary catalyst. Most US economic reports weighed on the dollar during the week, strengthening the Canadian dollar. When the week began, data revealed that July’s US wholesale inflation was softer than expected.

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Meanwhile, the headline CPI figure eased to 2.9% from 3.0%. Consequently, investors increased the likelihood of a Fed rate cut in September. However, the dollar got a brief respite when retail sales jumped by 1.0%. Nevertheless, Fed rate cut expectations kept a lid on gains.

Next week’s key events for USD/CAD

Next week, traders will pay attention to Canada’s inflation and retail sales data. Meanwhile, the US will release the FOMC meeting minutes. At the same time, investors will pay close attention to Powell’s speeches at the Jackson Hole Symposium.

Canada’s CPI fell by 0.1% in the previous month. Inflation in the country has fallen in recent months, giving policymakers confidence to cut interest rates. At the same time, Canada’s economy has slowed down, especially in the labor market.

Consequently, investors expect the Bank of Canada to cut rates in September. Another cooler inflation report will support these expectations. Meanwhile, the FOMC minutes might contain clues on the Fed’s next move. Furthermore, Powell’s speeches will show whether the central bank is ready to cut in September.

USD/CAD weekly technical forecast: Bears meet the 1.3700 barrier

On the technical side, the USD/CAD price trades below the 22-SMA with the RSI below 50, indicating a bearish bias. The trend recently reversed when the price reached the 1.3900 resistance level. Bears took control by pushing the price below the 30-SMA. However, the decline has paused at the 1.3700 support.

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Here, bulls might resurface to retest the recently broken 22-SMA before the downtrend continues. A break below the 1.3700 support will allow bears to reach the 1.3601 level. Moreover, the price would make a lower low, confirming the downtrend. On the other hand, if the SMA fails to hold as resistance, the price will climb to the 1.3900 resistance.

https://www.forexcrunch.com/blog/2024/08/18/usd-cad-weekly-forecast-high-odds-for-25-bps-cut-in-sep/