- USD/CAD has printed a double top setup on its 4hr chart.
- Markets expect another 50bp hike from BOC.
- The U.S will announce consumer inflation data.
USD/CAD has its price hitting a massive resistance ahead of the Bank of Canada’s upcoming rate decision. While publishing this content, the pair traded at 1,3020, slightly beneath this month’s peak at 1.3082. USD-CAD has gained over 4% from June’s lowest mark.
The Canadian economy stares at significant challenges. Inflation has climbed to three-decade highs as food and oil prices remain elevated. Nevertheless, that’s a worldwide situation. The latest data indicated that Canada saw a sharp decline in retail sales in June.
Moreover, the latest Statistics Canada data indicated a struggling labor market. While the nation’s unemployment rate declined beneath 5%, the economy lost more than 35,000 jobs in June.
That represents a massive contrast to the United States, which added more than 372,000 jobs over the month. U.S’s unemployment rate stayed unaltered at 3.7%.
The upcoming financial decision by the BOC remains the next catalyst for USD-CAD. Analysts expect the central bank to introduce another 50bp hike as inflation hits multi-decade peaks, pushing the rates to 2.25%.
The Bank of Canada has been raising interest rates since 2022 started. It began with a 25bp hike in March this year before resorting to a 50bp in April & June. The rate increases will possibly mean more pain for civilians as their debt to income has touched record peaks.
The USD-CAD will then respond to the U.S consumer inflation data. Market players expect the stats to show an 8.8% inflation surge in June. Such an outcome will mean the highest figure in more than four decades.
Still, the Federal stays more hawkish than the Bank of Canada. The Fed has already increased interest rates by 150bp and hints at more similar moves.
The 4hr chart shows USD-CAD climbed towards the 1.3081 peaks in June. The pair retested the mark this month and battled to rise beyond it. Furthermore, USD/CAD has moved beyond the 25 and 50 dMAs, whereas the RSI entered the neutral region.
Thus, USD-CAD’s exchange rate remains neutral at the moment. A move past the 1.3081 resistance will confirm a bullish breakout. Meanwhile, a decline beneath the 1.2935 support will cancel the double-top formation and support more plunges.