USD to CAD Price Forecast: US CPI Report to Dictate Forex Pair’s Future Course

Highlights

• Market awaits U.S. CPI report.
• Rising crude complicates Fed decisions.
• Bullish sentiment toward USD to CAD, but vulnerable. 

Overview

The USD to CAD is lower on Thursday, as the market keenly awaits the unveiling of the U.S. Consumer Price Index (CPI) report, scheduled for 12:30 GMT. The greenback, in the meanwhile, maintained its position against the Canadian Dollar in anticipation of this pivotal inflation data which could reshape the Federal Reserve’s policies.

Recent Market Trends

Earlier this week, the U.S. Dollar touched a two-month peak against the loonie. Market sentiment seemed to lean towards the Bank of Canada’s hesitance in hiking rates, while the majority opinion suggests that the Fed might have reached its limit in rate augmentations. This sentiment is further bolstered by the ongoing turbulence in China’s economic landscape, making the U.S. Dollar a preferred choice for safe-haven investments.

Inflation Data and Forecasts

Forecasts from Wall Street hint at a steady core consumer price index, expected at 4.8% YoY for July. Additionally, the Dow Jones’ consensus predicts a 0.2% rate for the same month. The upcoming consumer price index report will be under intense scrutiny, with primary attention on core inflation aspects like energy, shelter, health care, and food.

Federal Reserve’s Future Direction

While the broader market consensus is that the Federal Reserve will likely maintain its rate during the September 20th meeting, there are contrasting opinions. Notably, Federal Reserve Bank Governor Michelle Bowman speculates that the current rate-hike cycle may not have concluded. Moreover, the rising crude oil prices, the highest since January, could introduce further complexities to the Fed’s decisions.

Short-term Forecast

Amidst a challenging period for the Canadian dollar, characterized by job losses and China’s economic slowdown, the currency witnessed a slight recovery influenced by surging oil prices. However, the U.S. inflation data, slated for Thursday, will be pivotal. Should the inflation rate surpass expectations, it might fortify the U.S. Dollar’s position against the Canadian Dollar. Conversely, a meeting or weakening of the forecasted inflation rate may propel the Canadian Dollar.

In conclusion, the market sentiment leans bullish for USD to CAD, particularly in light of external pressures from the Chinese economy and internal setbacks. The forthcoming U.S. inflation data will be crucial in setting the short-term trajectory for the USD to CAD pair.

Technical Analysis

The USD to CAD currently trades at 1.3403, just a touch below its prior 4-hour mark of 1.3418. Positioned above the 200-4H moving average at 1.3249, it suggests a prevailing bullish momentum.

Contrarily, it trades marginally above the 50-4H moving average of 1.3345, further affirming this bullish trend. The 14-4H RSI, at 52.30, leans slightly above the neutral midpoint, pointing to a bit of strengthening momentum.

As the price stands inside the main resistance zone (1.3406-1.3450) and comfortably above the main support area (1.3142-1.3118), the short-term outlook for USD to CAD remains on the bullish side.

However, it also remains vulnerable to a pullback into the moving averages if the U.S. CPI report comes in softer-than-expected.