Canadian Dollar Forecast: USD/CAD Rebounds Ahead of Canada CPI

Canadian Dollar Outlook: USD/CAD

USD/CAD bounces back ahead of the monthly low (1.3489) to snap the series of lower highs and lows carried over from last week, but the update to Canada’s Consumer Price Index (CPI) may sway the exchange rate as the report is expected to show persistent inflation.

Canadian Dollar Forecast: USD/CAD Rebounds Ahead of Canada CPI

USD/CAD seems to be defending the opening range for September as it halts a five-day selloff, and the exchange rate may attempt to retrace the decline from the monthly high (1.3695) ahead of the Federal Reserve interest rate decision on September 20 as the uptick in the US Consumer Price Index (CPI) puts pressure on the central bank to further combat inflation.

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Canada Economic Calendar

FOREX.com Economic Calendar

Until then, data prints coming out of Canada may influence USD/CAD as the headline reading for inflation is seen widening to 3.8% in August from 3.3% per annum the month prior, and signs of stick price growth may push the Bank of Canada (BoC) to reestablish its hiking-cycle as ‘Governing Council remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed.’

However, a softer-than-expected Canada CPI print may prop up USD/CAD as it encourages the BoC to keep interest rates on hold, and it remains to be seen if the Federal Open Market Committee (FOMC) will adjust its forward guidance as Chairman Jerome Powell and Co. are scheduled to update the Summary of Economic Projections (SEP).

With that said, the update to Canada’s CPI may sway USD/CAD ahead of the Fed rate decision as the BoC continues to combat inflation, but the exchange rate may attempt to retrace the decline from the monthly high (1.3695) as it seems to be defending the opening range for September.

USD/CAD Price Chart –Daily

Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView

• USD/CAD snaps the series of lower highs and lows carried over from last week as it rebounds ahead of the monthly low (1.3489), and the exchange rate may stage a larger rebound as it appears to be defending the opening range for September.
• Need a move back above 1.3630 (38.2% Fibonacci retracement) to bring the monthly high (1.3695) on the radar, with the next area of interest coming in around above 1.3820 (161.8% Fibonacci extension).
• However, failure to hold above the monthly low (1.3489) may push USD/CAD towards 1.3440 (23.6% Fibonacci retracement), with a move below the 50-Day SMA (1.3415) opening up the 1.3230 (100% Fibonacci extension) to 1.3310 (50% Fibonacci retracement) region.

Additional Market Outlooks

AUD/USD Forecast: Australian Dollar Steady Ahead of Jobs Report

British Pound Forecast: GBP/USD Head-and-Shoulders Pattern Unfolds

--- Written by David Song, Strategist

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