The USD/CAD pair has stabilized today as investors wait for major events this week. It rose to 1.4020 on Monday, a few points above last Friday’s low of 1.3967. This pullback will now be put to the test as the US publishes important macro data on inflation, consumer confidence, and GDP and as the Federal Reserve and Bank of Canada (BoC) publish their interest rate decisions.
BoC Hike Meets Fed Pause
The USD/CAD exchange rate has been in a strong sell-off in the past few weeks as investors wait for the upcoming macro events from the US and Canada. It also dropped as the prices of crude oil rallied , with Brent and the West Texas Intermediate (WTI) rising to $117 and $103, respectively.
There will be several important catalysts for the USDCAD pair this week. The first one will come out on Tuesday when the US publishes the latest consumer confidence and house price index reports. Economists believe that consumer confidence fell this month as inflation remained at an elevated level.
The USD/CAD pair will then react to the upcoming Federal Reserve interest rate decision on Wednesday. Economists expect the bank to leave interest rates unchanged between 3.75% and 4%. It previously hiked rates by 0.25% in the previous meeting.
The US will then publish the important Personal Consumption Expenditure (PCE) report on Thursday this week. This is a crucial report that measures the change in prices of most items in rural and urban areas. It is the Fed’s favorite inflation gauge. While important, it is unclear whether the report will have a major impact on the US dollar because it will come a day after the Fed decision.
The other key catalyst for the USD/CAD pair will be the Bank of Canada decision on Wednesday. Most analysts expect the bank to hike interest rates by 25 basis points to curb the rising inflation.
USD/CAD Technical Analysis
USD/CAD chart | Source: TradingView
The daily chart shows that the USD to CAD pair has been in a strong sell-off in the past few days. It bottomed at the 38.2% Fibonacci Retracement level. It also formed a small morning star candlestick pattern, which often leads to a reversal.
The pair bottomed close to the 200-day Exponential Moving Average (EMA). Therefore, it will likely bounce back briefly and then resume the downward trend towards the 38.2% retracement level of 1.3887.
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