• The US dollar has risen recently due to a shift in the outlook for Fed policy.

• The Loonie plunged as oil prices dipped 3%.

• Traders are gearing up for Canada’s inflation data.

The USD/CAD outlook shows fundamentals that support further upside for the pair. Fed policymakers have assumed a more cautious tone due to upbeat data, boosting the dollar. At the same time, the Loonie is collapsing with oil due to demand concerns and easing supply worries.

–Are you interested to learn more about ECN brokers? Check our detailed guide-

The US dollar has risen against the Canadian dollar recently due to a shift in the outlook for Fed policy. US data has shown a resilient economy and inflation came in higher than expected in September. As a result, market participants started pricing in a small likelihood of a pause in November.

Meanwhile, policymakers have resorted to cautious remarks regarding rate cuts. Christopher Waller and Neel Kashkari agreed that the Fed should proceed with caution. This is a significant change from September, when the Fed cut rates by 50-bps.

Meanwhile, the Canadian dollar plunged as oil prices dipped 3% on Tuesday. The decline came after data from China revealed a drop in September oil imports. Furthermore, market participants were disappointed with recent efforts to support China’s fragile economy. At the same time, supply worries eased after Israel said it might not strike Iranian oil. For weeks, oil has rallied on the likelihood of retaliation after Iran hit Israel with over 200 missiles.

Elsewhere, traders are gearing up for Canada’s inflation data. Economists expect all the inflation numbers to remain the same from last month. Therefore, the monthly figure will likely drop by 0.2%. A bigger-than-expected drop will raise bets for Bank of Canada rate cuts, further sinking CAD.

USD/CAD key events today

• Canada CPI m/m
• Canada Median CPI y/y
• Canada Trimmed CPI y/y

USD/CAD technical outlook: Rally breaches the 1.3800 hurdle

On the technical side, the USD/CAD price has risen to the 1.3800 key psychological level and trades far above the 30-SMA. Meanwhile, the RSI has stayed in the overbought region for a while, suggesting solid bullish momentum.

–Are you interested to learn more about making money in forex? Check our detailed guide-

The bullish bias is strong. However, the price has been climbing for long without retracements. At the same time, the RSI has made a bearish divergence. Therefore, bulls are exhausted and might soon pause before continuing higher. Consequently, the price might soon revisit the 30-SMA or the 1.3700 support level.

https://www.forexcrunch.com/blog/2024/10/15/usd-cad-outlook-oil-dip-strong-dollar-urge-for-a-rally/