The USD/CAD price has hit a major resistance ahead of the upcoming Bank of Canada (BoC) interest rate decision. The pair is trading at 1.3020, which is slightly below this month’s high of 1.3082. It has surged by more than 4% from its lowest level in June.
Bank of Canada decision
The Canadian economy is going through significant challenges. Inflation has surged to the highest level in over three decades as oil and food prices surge. This is a global situation though. Recent data showed that the country’s retail sales declined sharply in May.
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Most recently, data by Statistics Canada revealed that the labor market is struggling. While the unemployment rate dropped below 5%, the economy actually lost over 35k jobs in June. This is a sharp contrast to the US, which created over 372k jobs during the month. Its unemployment rate remained unchanged at 3.7%.
The next key catalyst for the USD/CAD price will be the upcoming interest rate decision by the Bank of Canada. With inflation at a multi-decade high, analysts expect that the bank will hike interest rates by another 50 basis points and push it to 2.25%.
The BoC has been hiking rates this year. It started in March when it raised rates by 25 basis points. It then hiked by 50 basis points in April and June this year. These hikes will likely lead to more pain for Canadians since their debt to income has surged to a record high.
The USD/CAD pair will then react to the latest US consumer inflation data. Analysts expect the data will show that inflation rose by 8.8% in June. If they are correct, it will be the highest it has been in over four decades.
Still, the Fed remains more hawkish than the BoC. It has already hiked rates by 150 basis points and is hinting that more will come.
USD/CAD forecast
The four-hour chart shows that the USD/CAD pair rose to a high of 1.3081 in June. It then retested this level this month and struggled to move above it. The pair has moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the neutral level.
Therefore, the outlook of the USD to CAD exchange rate is currently neutral. A bullish breakout will be confirmed if it manages to move above the resistance at 1.3081. On the other hand, a drop below the support at 1.2935 will validate the double-top pattern and lead to more downside.
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Source: https://invezz.com/news/2022/07/13/usd-cad-price-forecast-double-top-forms-ahead-of-boc-decision/