The USD/CAD currency pair experienced a bearish week, driven by a combination of economic data releases and political developments in the United States. Economic figures from Canada revealed a softening inflation rate, which decreased to 2.4% year-over-year, providing some support for the Canadian dollar. Additionally, Canada’s retail sales showed no change in November, further underscoring a stable economic environment. The Canadian dollar also benefited from market relief following the news that former President Donald Trump refrained from pursuing more aggressive tariffs.
In contrast, the US dollar saw a decline on Friday, after data highlighted a substantial downturn in business activity within the US service sector. This weak economic report heightened market expectations that the Federal Reserve might consider rate cuts in the near future.
Looking Ahead: Key Events for USD/CAD Next Week
Looking to the week ahead, the focus will be on critical data releases from both the United States and Canada. Key US economic reports, including durable goods orders and GDP figures, will be closely monitored. In addition, the Federal Reserve will hold its policy meeting on Wednesday, with many market participants anticipating that the central bank will keep rates unchanged. The Bank of Canada (BoC) will also meet on Wednesday, with traders speculating a 25-basis point rate cut. Furthermore, Canada’s GDP data, due on Friday, is expected to have a significant impact on the Canadian dollar’s outlook.
The upcoming GDP reports from both countries will provide fresh insights into the health of the US and Canadian economies, directly influencing expectations for future monetary policy adjustments. While the Federal Reserve is likely to stand pat on rates, the BoC’s anticipated rate cut could support the Canadian dollar.
USD/CAD Technical Outlook: Bears Eye Potential Trend Reversal
On the technical front, the USD/CAD pair has encountered resistance around the 1.4450 level, where the price has begun to consolidate. Prior to this pause, the pair had been following a strong bullish trend, supported by the 22-period simple moving average (SMA). However, a shift in momentum appears to be underway.
As the price approached 1.4450, bearish sentiment began to take hold, with engulfing candlestick patterns signaling a potential reversal. Furthermore, while the price continued to reach higher highs, the Relative Strength Index (RSI) showed lower highs, indicating bearish divergence. This divergence suggests that the bullish momentum may be fading.
Currently, the USD/CAD pair is trading below the 22-SMA, which signals a shift in sentiment towards a bearish outlook. Should the selling pressure persist into next week, the price could drop towards the next support level around 1.4003. A move below this support would confirm a bearish trend reversal. However, for a sustained downtrend to materialize, the pair would need to continue making lower lows and highs.
Conclusion
In summary, USD/CAD has faced downward pressure amid mixed economic data and evolving market expectations for monetary policy shifts. With important events scheduled for next week, including US and Canadian GDP reports and central bank meetings, the outlook for the pair remains uncertain. Traders will be closely watching these developments for clues on the future direction of the currency pair.
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