Canadian Dollar Forecast: USD/CAD Awaits Inflaton and Chair Powell’s Testimony

USD/CAD Analysis and Talking Points

• CAD Awaits Inflation and Chair Powell’s Testimony
• USD/CAD Test Big Pivot at 1.300

The Canadian Dollar has suffered in recent sessions amid the pullback across the commodity complex, coupled with a persistent bid in the greenback. However, breakouts have been hard to come by as rate differentials have continued to tighten suggesting USD/CAD is likely to remain a range trade. Elsewhere, what is also noteworthy is the USD failing to extend higher on the back of a 75bps rate hike. This perhaps signals that the greenback may be peaking in the short run, which is what I had been mulling over in yesterday’s note. (Is the USD Peaking)

Looking ahead, today will see the release of the latest inflation report, which will see used cars introduced, while also allocating a higher weight for gasoline. A reminder that at the last BoC meeting the bank stated that they are prepared to act more forcefully to contain inflation, indicating they are willing to hike 75bps. As it stands, money markets are pricing in 68bps worth of tightening at the July meeting, which would increase on the back of a higher-than-expected inflation figure and thus lift the Loonie.

Bank of Canada Rate Expectations

Big Pivot at 1.3000 for USD/CAD

USD/CAD is once again testing big resistance 1.3000, which has proved to be a stumbling block for the pair after two failed attempts to maintain a foothold above, peaking at 1.3079. While softer oil prices will see limited pullbacks from 1.3000, the USD will be the main driver of this pair and thus eyes will be on Chair Powell’s testimony.

USD/CAD Chart: Weekly Time Frame

Source: Refinitiv

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