USD/CAD Forecast: Another Test of Positive Slope in 50-Day SMA

US Dollar Outlook: USD/CAD

USD/CAD registers a fresh weekly low (1.3683) despite a larger-than-expected slowdown in Canada’s Consumer Price Index (CPI), and the exchange rate may continue to give back the advance from the month low (1.3629) if it fails to track the positive slope in the 50-Day SMA (1.3666).

USD/CAD Forecast: Another Test of Positive Slope in 50-Day SMA

USD/CAD carves a series of lower highs and lows even as the headline reading for Canada inflation narrows to 3.1% in October from 3.8% per annum the month prior to mark the lowest reading since June 2021, but the exchange rate may attempt to retrace the decline from the monthly high (1.3899) should it continues to close above the moving average.

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Looking ahead, evidence of slowing inflation may keep the Bank of Canada (BoC) on the sidelines as ‘economic growth is expected to continue to be weak for the next year,’ and the central bank may further adjust the forward guidance ahead of 2024 amid ‘clearer signs that monetary policy is moderating spending and relieving price pressures.’

Canada Economic Calendar

FOREX.com Economic Calendar

In turn, it remains to be seen if Canada’s Retail Sales report will sway USD/CAD ahead of the BoC meeting on December 6 as Dollar as the central bank appears to be at or nearing the end of its hiking-cycle, but signs of a slowing economy may produce headwinds for the Canadian Dollar as private-sector consumption is projected to hold flat in September.

At the same time, a better-than-expected Retail Sales report may generate a bullish reaction in the Canadian Dollar as Governor Tiff Macklem and Co. are ‘prepared to raise the policy rate further if needed,’ and USD/CAD may snap the range bound price action should it fail to defend the monthly low (1.3629).

With that said, the recent series of lower highs and lows may push USD/CAD towards the 50-Day SMA (1.3666), but the exchange rate may attempt to retrace the decline from the monthly high (1.3899) should it continue to track the positive slope in the moving average.

USD/CAD Price Chart –Daily

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

• USD/CAD carves a series of lower highs and lows to register a fresh weekly low (1.3683), with a breach below the 50-Day SMA (1.3666) bringing the monthly low (1.3629) on the radar.
• A break/close below 1.3630 (38.2% Fibonacci retracement) opens up the October low (1.3562), but the exchange rate may clear the bearish price series should it continue to track the positive slope in the moving average.
• Need a break/close above 1.3810 (161.8% Fibonacci extension) to bring the monthly high (1.3899) back on the radar, with the next area of interest coming in around the 2022 high (1.3978).

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--- Written by David Song, Strategist

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