The Energy Information Administration (EIA) has updated its demand growth forecasts, projecting a more positive outlook. This was supported by a larger-than-expected drop in US crude oil inventories, indicating rising demand. Investors are now preparing for the US Consumer Price Index report and the upcoming Federal Reserve meeting.
The USD/CAD forecast is bearish, with the Canadian dollar benefiting from the improved demand outlook for oil. On the other hand, the US dollar has paused its recent rally as investors await important economic reports and the Fed meeting.
The Canadian dollar was strong on Wednesday as oil prices climbed following the EIA’s positive demand growth forecasts. Meanwhile, the US dollar retreated slightly after reaching a four-week peak due to reduced expectations of a Fed rate cut. The tight labor market indicated in last week’s jobs report may delay any early rate cuts, with only a 56% chance of a cut in September.
Investors are closely watching the US Consumer Price Index report and the Fed meeting for further clues on the future direction of the US dollar. The Fed’s projections for growth and inflation will also be important in determining when the central bank might consider lowering borrowing costs.
Key events for the USD/CAD pair today include the US Consumer Price Index, the FOMC policy meeting, and the FOMC press conference. On the technical side, the USD/CAD price has pulled back after hitting resistance near 1.3780, but the bullish bias remains strong. Support levels are expected at the 30-SMA, 1.3720, and the recently broken channel resistance, with a potential bounce higher towards a new high above 1.3780.