Several economic reports from the US indicated a slowdown in the economy, with business activity falling in April due to the impact of higher interest rates. Investors are closely watching the upcoming FOMC meeting and US jobs report for further insights. In the USD/CAD weekly forecast, a bearish trend is emerging as the dollar weakens amid the economic slowdown.
The USD/CAD pair experienced a bearish week as the dollar weakened in response to the sluggish US economy. Various economic reports highlighted the slowdown, including a drop in business activity in April due to higher interest rates. The US economy also grew at a lower-than-expected rate in the first quarter, leading to a decrease in expectations for rate cuts despite persistently high inflation.
Looking ahead, Canada is set to release its gross domestic product report, with expectations of a slowdown due to higher interest rates dampening demand. A weak GDP report could increase the likelihood of the Bank of Canada’s first rate cut in June. Meanwhile, investors will be focused on the FOMC meeting and US jobs report for clues on potential interest rate cuts by the Federal Reserve. The NFP report could also impact rate cut expectations depending on its outcome.
From a technical perspective, the USD/CAD price has retraced to test the 22-SMA after facing resistance at the 1.3840 level. The RSI has dropped to the 50-mark, indicating a pause in the bullish trend for a pullback. The price currently sits near support at 1.3601 and resistance at 1.3840, with potential for a bounce off the SMA support towards the nearest resistance. However, a break below the SMA and support level could signal a bearish shift towards the 1.3400 support level.