• The BoJ held rates on Friday and failed to give clear guidance on future rate hikes.

• Market participants are pricing a 49% chance of another massive Fed cut in November.

• Canadian sales jumped more than expected in July.

The USD/CAD forecast shows a return of dollar bulls after a disappointing Bank of Japan policy meeting. Consequently, the Canadian dollar gave up some of last week’s gains when sales data revealed resilient consumer spending.

The Bank of Japan held rates on Friday and failed to give clear guidance on future rate hikes. As a result, investors were disappointed, leading to a drop in the yen. This, in turn, boosted the US dollar, which rose against most peers.

The rebound picked the dollar up from lows hit after the FOMC policy meeting. The US Central Bank cut borrowing costs by 50-bps, beating forecasts of 25-bps. Furthermore, policymakers forecast more rate cuts to come, with market participants pricing a 49% chance of another massive cut in November. The greenback might be under more pressure if the Fed continues its aggressive easing. However, this will depend on incoming data, which might shift the outlook.

Meanwhile, the Canadian dollar reached new highs on Friday after data revealed that Canadian sales jumped more than expected in July. Notably, retail sales increased by 0.9% compared to economists’ forecast of 0.6%. The data eased worries that the economy was on a rapid decline.

However, it had little impact on rate cut expectations. The Bank of Canada might increase the size of rate cuts after the Fed’s massive cut.

USD/CAD key events today

• US flash manufacturing PMI
• US flash services PMI

USD/CAD technical forecast: Bulls bounce of channel support

On the technical side, the USD/CAD price is bouncing higher after meeting its bullish channel support. The price recently has a sharp decline after meeting the channel resistance. However, it paused at the support and is now looking up. The RSI trades slightly above 50, supporting bullish momentum.

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However, the price is still on the lower side of the 30-SMA, which poses a big challenge. Nevertheless, since the price has been on a shallow climb, it might soon break above the SMA and the 1.3600 resistance to revisit the 1.3650 level. On the other hand, if the SMA holds firm, bears might break out of the bullish channel and reverse the trend.

https://www.forexcrunch.com/blog/2024/09/23/usd-cad-forecast-dollar-rebounds-after-boj-disappoints/