• The Fed cut rates by 50-bps, starting its easing cycle with a bang.

• Canada’s inflation eased more than expected on a monthly basis.

• Retail sales in Canada jumped, showing solid consumer spending.

The USD/CAD weekly forecast shows a slow decline as the Fed follows the Bank of Canada in lowering borrowing costs.

Ups and downs of USD/CAD

The USD/CAD pair ended the week down as the dollar dropped following the FOMC policy meeting. Data before the meeting and economists’ estimates had pointed to a gradual pace for rate cuts. Meanwhile, market participants had priced a 65% chance of an aggressive start.

On Wednesday, the Fed cut rates by 50-bps, starting its easing cycle with a bang. The dollar dropped against most of its peers. However, the decline against the loonie was slight since the BoC may also cut interest rates.

Meanwhile, data from Canada showed a mixed picture. Inflation eased more than expected on a monthly basis. On the other hand, retail sales jumped, showing solid consumer spending.

Next week’s key events for USD/CAD

Next week, the US will release data on Gross Domestic Product and core durable goods. Meanwhile, Canada will only release GDP data. The US GDP data will show the health of the economy, which could influence the Fed’s policy outlook.

A healthy economy could lower rate cut expectations as the Fed would not need to be too aggressive. On the other hand, if GDP shows a weak economy, it could increase expectations for a rate cut in November.

Meanwhile, in Canada, the Bank of Canada might push up the size of future rate cuts, to reflect the Fed’s recent move. The GDP report will also influence the outlook for future policy moves in Canada.

USD/CAD weekly technical forecast: Price action suggests bearish reversal

On the technical side, the USD/CAD price trades slightly above the 22-SMA, a sign that bulls are in the lead. However, price action shows that the bias might soon shift. Notably, the RSI trades below 50, supporting bearish momentum.

-Are you looking for the best CFD broker? Check our detailed guide-

Furthermore, the price made a bearish engulfing candle after pausing at the 1.3600 key resistance level. It also briefly touched the 0.382 Fib retracement level which also acted as resistance. Bears might take back control in the coming week if the price breaks below the 22-SMA. USD/CAD might then fall to the 1.3450 support. A break below this level would signal a continuation of the previous downtrend.

https://www.forexcrunch.com/blog/2024/09/22/usd-cad-weekly-forecast-fed-joins-boc-in-rate-cut-race/