- The Bank of Canada reduced interest rates by 50 basis points on Wednesday.
- Oil prices climbed nearly 1% early Thursday following missile strikes from Hezbollah on Israel.
- The US dollar remained stable as traders awaited the upcoming November US presidential election.
The USD/CAD forecast indicates a potential pullback after the pair reached new highs. On Wednesday, the Canadian dollar fell to an 11-week low following the Bank of Canada’s 50-bps rate cut. Nevertheless, it bounced back on Thursday as oil prices rose amid escalating tensions in the Middle East.
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As anticipated, the Bank of Canada lowered interest rates by 50 basis points on Wednesday. The Canadian central bank continues to be the most aggressive among its counterparts, exerting significant pressure on the Canadian dollar. This cut pushed the currency to a low not seen in 11 weeks against the US dollar.
On the other hand, the loonie saw a recovery on Thursday after missile exchanges in the Middle East led to a spike in oil prices. Early Thursday, oil increased nearly 1% following Hezbollah’s missile attack on Israel. Despite calls for a ceasefire, the conflict persists, and the possibility of further escalation is expected to support both oil and the CAD.
Meanwhile, the US dollar stayed steady as market players bided their time ahead of the November presidential election. The uncertainty surrounding the election’s outcome has resulted in increased interest in safe-haven assets like the dollar and gold.
Additionally, traders are anticipating more economic data that will influence expectations regarding future Fed rate cuts. Unemployment claims will provide insights into the labor market’s condition, while PMI data will reflect business activity in the manufacturing and services sectors. A strong economy might diminish expectations for a November rate cut, potentially leading to a pause. Conversely, weak data could reinforce predictions of two more rate cuts by year-end.
Key USD/CAD Events Today
- Unemployment Claims
- Flash Manufacturing PMI
- Flash Services PMI
USD/CAD Technical Forecast: Bulls Weakened Near 1.3825 Resistance
From a technical perspective, the USD/CAD price is testing the 30-SMA support line. Recently, bulls reached a new high in the uptrend but struggled to maintain momentum above the 1.3825 resistance level. Notably, while the price achieved a higher high, the RSI has begun to trend downward, indicating a bearish divergence.
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This divergence suggests that the uptrend may be losing steam, potentially giving bears an opportunity to take control. If they manage to break below the SMA, the price is likely to target the 1.3750 support level, initiating a possible downtrend for USD/CAD.
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