Thursday saw the continuation of the bullish USD/CAD forecast as the Canadian dollar struggled, weakened by the aftermath of Wednesday’s oil price dip. Despite hawkish minutes from the Bank of Canada’s recent meeting, this weakness came. 

Moreover, the Canadian dollar has closed lower for three consecutive days, following its most significant weekly gain since March last week.

Meanwhile, oil, a significant Canadian export, settled 2.6% lower. This decline came amid concerns about reduced demand in the US and China, contributing to a more than 6% decrease since the week began.

Elsewhere, a Reuters poll revealed that the Canadian dollar will strengthen less than initially anticipated over the next year. Furthermore, a slowdown in the domestic economy might open the possibility of interest rate cuts. However, the minutes from the Bank of Canada’s October 25 meeting were slightly hawkish. Some governing council members foresaw the potential need for additional interest rate hikes.

Still, money markets anticipate the Canadian central bank to start lowering its benchmark interest rate, possibly as early as April. It follows the decision to maintain it at a 22-year high of 5% for the second consecutive time during the October policy meeting. 

USD/CAD key events today

Traders are focused on key US events below, as Canada will not release significant economic reports.

• Initial jobless claims report.
• Fed Chair Powell’s speech.

USD/CAD technical forecast: Rally hits a wall at 1.3800.

USD/CAD 4-hour chart

On the charts, the USD/CAD rally has paused at the 1.3800 key level. However, the bullish bias is still strong, with the price well above the SMA and the RSI above 50. The pair experienced a sudden reversal that saw bulls take control by pushing the price above the 1.3750 level and the 30-SMA. 

At the same time, the RSI went from the oversold region to bullish territory above 50. The pause at 1.3800 has allowed bears to resurface. It might lead to a retracement to retest recently broken levels, including the 30-SMA and the 1.3750 level. Still, bulls will likely break above 1.3800 if the price stays above the SMA.

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