Canadian Dollar Forecast: USD/CAD Approaches Monthly High

Canadian Dollar Outlook: USD/CAD

USD/CAD approaches the monthly high (1.3775) ahead of the Bank of Canada (BoC) and Federal Reserve interest rate decisions, and the exchange rate may attempt to retrace the decline from the June high (1.3798) as it carves a series of higher highs and lows.

Canadian Dollar Forecast: USD/CAD Approaches Monthly High

USD/CAD stages a three-day rally after failing to test the monthly low (1.3557), and the exchange rate may face increased volatility over the coming days even though the BoC and Fed are expected to remain on the sidelines.

US/Canada Economic Calendar

The forward guidance for monetary policy may sway USD/CAD as the BoC is anticipated to keep interest rates on hold for the third consecutive meeting, and the central bank may show a greater willingness to combat inflation as 'recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs.’

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In turn, more of the same from the BoC may lead to a bullish reaction in the Canadian Dollar as the Governing Council appears to be at or nearing the end of its rate-cutting cycle, but USD/CAD may extend the advance from the start of the week should Governor Tiff Macklem and Co. keep the door open to implement lower interest rates.

With that said, USD/CAD may carve a bullish price series over the remainder of the month, but the exchange rate may continue to trade within the June range should it struggle to push above the monthly low (1.3557).

USD/CAD Price Chart – Daily

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

• USD/CAD stages a three-day rally as it carves a series of higher highs and lows, with a close above the 1.3700 (38.2% Fibonacci extension) to 1.3710 (78.6% Fibonacci retracement) zone raising the scope for a test of the monthly high (1.3775).
• A move/close above 1.3780 (23.6% Fibonacci extension) brings the June high (1.3798) on the radar, with the next area of interest coming in around 1.3850 (50% Fibonacci extension).
• At the same time, lack of momentum to hold/close above the 1.3700 (38.2% Fibonacci extension) to 1.3710 (78.6% Fibonacci retracement) zone may push USD/CAD back toward 1.3630 (38.2% Fibonacci extension), with a breach of the monthly low (1.3557) bringing the June low (1.3540) on the radar.

Additional Market Outlooks

EUR/USD Rally Unravels Ahead of Monthly High

USD/CHF Bounces Back Ahead of Monthly Low

US Dollar Forecast: USD/JPY Struggles amid Failure to Test April High

AUD/USD Bounces Back Ahead of June Low to Register Fresh Yearly High

--- Written by David Song, Senior Strategist

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