USD/CAD forecast: BoC rate decision and US inflation data preview

July 10, 2023 08:42 PM PDT | By Invezz

USD/CAD forecast: BoC rate decision and US inflation data preview — Image source: Invezz

US inflation, BoC decision

The USD/CAD price will be moved by two important forex news events this week. First, the US will publish June’s consumer price index (CPI) data on Wednesday. Economists polled by Reuters expect the data to show that the country’s inflation continued slipping in June.

They believe that the headline consumer price index (CPI) dropped from 4% in May to 3.1% in June, the lowest level in months. Core inflation, which excludes the volatile food and energy prices, is expected to drop to 5.3%.

These numbers will come a few days after the US published the latest US non-farm payrolls (NFP) data. In its report, the Bureau of Labor Statistics (BLS) showed that the economy created over 209k jobs in June. An earlier report by ADP revealed that the US created more than 400k jobs.

Economists are now pricing in another 0.25% Fed interest rate hike later this month. In separate statements on Monday, Fed’s Loretta Mester, Mary Daly, and Raphael Bostic said that inflation remains too high.

The key CAD news will be the upcoming Bank of Canada decision. With Canada’s inflation being extremely stubborn, economists expect the bank to deliver another 0.25% rate hike. It will push rates to a 22-year high of 5% in a bid to lower inflation, which stands at 3.4%. In a note, an analyst told Reuters:

“While the data released since the June meeting suggests that the economy has cooled on the margin, the details have been uniformly stronger. We expect the BoC to take the policy rate 25 basis points higher to 5%.”

USD/CAD technical analysis

USD/CAD chart by TradingView

The USD to CAD exchange rate dropped to a low of 1.3115 in June. Since then, it has been attempting to bounce back, which saw it hit 1.3382 last week. It has formed an ascending channel shown in green and is now in its lower side.

The pair has moved slightly below the 25-period and 50-period moving averages while the MACD has dropped to the neutral point. Therefore, there is a likelihood that the pair will bounce back as buyers target the upper side of the channel at 1.3382. A move below the lower side of the channel will invalidate the bullish view.

The post USD/CAD forecast: BoC rate decision and US inflation data preview appeared first on Invezz.

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