USD/CAD Reveres Ahead of 50-Day SMA to Snap July Opening Range

USD/CAD Outlook

USD/CAD snaps the opening range for July as the Bank of Canada (BoC) delivers a hawkish rate-hike and the exchange rate may continue to give back the advance from the yearly low (1.3117) as it appears to be responding to the negative slope in the 50-Day SMA (1.3369).

USD/CAD Reveres Ahead of 50-Day SMA to Snap July Opening Range

The move above the support zone around the April low (1.3301) was short-lived as USD/CAD registers a fresh monthly low (1.3150), and the exchange rate may depreciate ahead of the Federal Reserve rate decision on July 26 as the BoC keeps the door open to further embark on its hiking-cycle.

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It seems as though the BoC will keep the door open to implement higher interest rates as the central bank warns that sticky inflation, with the Governing Council anticipating a ‘a slower return to target than was forecast in the January and April projections.’

As a result, the Canadian Dollar may continue to outperform against its US counterpart as Governor Tiff Macklem and Co. warns that ‘the downward momentum in inflation is slowing, largely because demand in Canada continues to outpace supply,’ and speculation for a looming shift in Fed policy may keep USD/CAD under pressure as the US CPI points to slowing inflation.

FOREX.com Economic Calendar

The Federal Open Market Committee (FOMC) may conclude its hiking-cycle this year as the update from the US Bureau of Labor Statistics (BLS) shows a slowdown in both the headline and core CPI, and the central bank may adjust the forward guidance for monetary policy also in response to the weaker-than-expected Non-Farm Payrolls (NFP) report.

Source: CME

In turn, speculation for a dovish Fed rate-hike may produce headwinds for the Greenback as the CME FedWatch Tool now reflects a greater than 70% probability of seeing the Fed Funds rate at 5.25% to 5.50% in December, and it remains to be seen if Chairman Jerome Powell and Co. will keep the door open to pursue a more restrictive policy as inflation seems to be moving towards the central bank’s 2% target.

With that said, USD/CAD may continue to give back the advance from the yearly low (1.3117) amid the failed attempt to push above the 50-Day SMA (1.3369), and the exchange rate may track the negative slope in the moving average as it fails to defend the opening range for July.

Canadian Dollar Price Chart – USD/CAD Daily

Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView

USD/CAD appears to have reversed course following the failed attempt to push above the 50-Day SMA (1.3369), and the exchange rate may track the negative slope in the moving average as the rebound from the yearly low (1.3117) unravels.
Failure to defend the monthly opening range may lead to a test of the June low (1.3117), with the next area of interest coming in around 1.2980 (61.8% Fibonacci retracement) to 1.3030 (78.6% Fibonacci extension).
Nevertheless, USD/CAD may stage further attempts to test the moving average if it defends the June low (1.3117), with a move above the 1.3230 (100% Fibonacci extension) to 1.3310 (50% Fibonacci retracement) region raising the scope for another run at the moving average.

Additional Market Outlooks

EUR/USD Clears Monthly Opening Range to Eye April High

Gold Price Stalls Again at Former Support Zone

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong

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