USD/CAD Forecast: Signal as US, Canada Inflation Cools

Summary:
• The USD/CAD price remained in a tight range on Friday as investors reflected on the recent inflation numbers from the US and Canada

The USD/CAD price remained in a tight range on Friday as investors reflected on the recent inflation numbers from the US and Canada. It was trading at 1.3318, which was much lower than last month’s high of 1.3972. This price is slightly above this month’s low of 1.3230.

US and Canada inflation data

The USD to CAD exchange rate remained in a consolidation phase after Canada’s inflation numbers came in line with what analysts were expecting. Data published by the statistics agency showed that inflation rose by 6.9% on a year-on-year basis. It rose by 0.7% on a monthly basis, down from the previous 0.8%.

These numbers show that Canada’s inflation may have peaked. Excluding gasoline prices, inflation was actually relatively muted. Gasoline prices surged by 9% during the month. Food prices also moderated slightly. 

Therefore, analysts expect that the Bank of Canada will continue hiking interest rates albeit at a slower pace. The bank hiked rates by 0.50% in October, bringing the headline rate to 3.75%. In a note, analysts at BMO expect that the BoC will hike rates by another 0.50% in December followed by slower increases in the first quarter.

The USD/CAD price also reacted to the latest American inflation numbers published last week. The numbers revealed that the country’s inflation eased from 8.3% in September to 7.7% in October. Therefore, analysts expect that the Fed will hike rates by 0.50% in December, down from the past four 75 basis point hikes.

USD/CAD forecast

The four-hour renko chart shows that the USD to CAD exchange rate has been in a bearish trend in the past few days. It dropped to a low of 1.3245, which was along the upper side of the ascending channel shown in black. The pair moved slightly below the 50-day moving averages while the awesome oscillator and relative strength index have retreated.

Therefore, after testing the upper side of the channel, the pair will likely resume the bullish trend as buyers target the key resistance at 1.3450. A drop below the support at 1.3150 will invalidate the bullish view.