- The USD/CAD pair maintains a bullish bias amid weak oil prices and heightened expectations of rate cuts by the Bank of Canada.
- This week’s upcoming Canadian CPI release could boost the CAD if the data exceeds the forecast.
- Traders look forward to the Canadian CPI and FOMC’s Waller’s comments for further policy cues.
The USD/CAD forecast shows an uptrend around 1.4050, backed by a waning Canadian dollar amid declining oil prices and rising BoC rate cut bets. The Bank of Canada business outlook indicated an improvement in business sentiment.
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However, firms are cautious because of US tariff expectations and decreased growth. Additionally, October’s policy meeting has a 77% probability of another 25 basis point cut. Meanwhile, the crude oil prices have declined amid oversupply concerns, weighing on the Loonie.
The much-anticipated Canadian Consumer Price Index report is expected to indicate a 2.3% YoY gain in September. An upside surprise could support the CAD and cap BoC rate cuts.
On the other hand, the US dollar strengthened on Tuesday, supported by policy divergence and safe-haven demand. Moreover, Kevin Hassett hinted that the US government shutdown could end sometime this week. The risk sentiment also stabilizes after fears of trade tensions between China and the US have settled.
USD/CAD Daily Key Events
The significant events in the day include:
- FOMC member Waller speaks
- Canadian CPI m/m
On Tuesday, traders are looking ahead to the speech by FOMC’s Waller and the Canadian CPI m/m release to get insight into the policy direction and economic outlook. Additionally, the US CPI release has been postponed to 24 October, expecting a rise to 3.1% YoY.
USD/CAD Technical Forecast: Eyes a Breach above 1.4070
The USD/CAD 4-hour chart indicates that the pair hovers above the 1.4050 level, after repeated pullbacks around 1.4070, reflecting a modest bullish bias. The pair continues to trade above the key moving averages. Additionally, investor interest stays firm on mild dips, signaling market confidence.
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The RSI is at 59, suggesting a possibility of further gains before moving towards the overbought region. A decisive breach above 1.4070 could extend gains towards 1.4150 and 1.4200, close to the resistance zone. However, a drop below the 1.3980 level could lead to a pullback towards the 1.3900 level.
Support levels:
- Initial support near the 50-period SMA lies around 1.4030.
- Short-term key support sits at 1.3980.
- The major support zone near the 200-period SMA is at 1.3900.
Resistance levels:
- Immediate resistance sits near the 1.4070 and 1.4100 levels.
- The next upside target is around 1.4150.
- Strong resistance lies around 1.4200.
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