USD/CAD Daily Price Forecast – Both Sides of the Pair Wage War to Gain Control Ahead of Canadian CPI

USD/CAD holds a narrow range going into the end of the week, but updates to Canada’s Consumer Price Index (CPI) may fuel the recent rebound in the exchange rate as the headline reading for inflation is expected to hold steady at 2.5% per annum in July. Signs of static price growth may dampen the appeal of the Canadian dollar as it does little to alter the monetary policy outlook, and a batch of lackluster data prints may prop up USD/CAD over the coming days as it dampen bets for another Bank of Canada (BOC) rate-hike in 2018. It seems as though the BOC will stick to the sidelines at the next meeting on September 5 after raising the benchmark interest rate in July, and Governor Stephen Poloz & Co. may ultimately tame expectations for an imminent rate-hike as the possibility of more trade protectionism is the most important threat to global prospects. Even though the Governing Council expects that higher interest rates will be warranted to keep inflation near target, the ongoing adjustment in U.S. policy may push the BOC to soften its hawkish tone given mounting trade tensions.

Investors Focus on Canadian CPI

As of writing this article, USDCAD is trading at 1.3153 down 0.05% on the day. While investors focus on Canadian calendar continues to supply bullish influence for Canadian dollar along with a disappointing US macro data and proceedings on Sino-U.S. Trade talks which resulted in easing of U.S Greenback’s strength so far, positive long term outlook for US Dollar owing to the Federal Reserve’s hiking-cycle instills a long-term bullish outlook for the exchange rate as Chairman Jerome Powell & Co. appear to be on track to deliver four rate-hikes in 2018 and current developments coming out of the U.S. keeps providing strength for USD as President Donald Trump now tweets that ‘money is pouring into our cherished DOLLAR like rarely before. With both sides of market seeing news that provides positive influence to respective currencies and neither side having an update decisive enough to create a breakout, both sides of the currency pair wage war for control over the other ahead of North American market hours.

From technical standpoint, USDCAD continues to move higher after it formed a seven-week bottom at 1.2960, climbing above the 20- and 40-simple moving averages (SMAs) in the daily time-frame, confirming the bullish picture. However, the RSI indicator and the MACD oscillator have both weakened in the positive area, with the former slightly sloping down above the 50 level. The latter is heading above its red trigger line but moves near its zero line. Should the price continue to move higher, immediate resistance could be found around the 1.3290 hurdle, taken from the peak on July 19^th and an aggressive bullish rally above this zone could open the way towards the one-year high of 1.3385, achieved on June 27^th. In case of bearish extensions, investors could look for support at 1.3072. Failure to hold above this level could open the door for the 1.2960/1.2880 support levels.