Today’s USD/CAD outlook is bullish as the dollar holds steady amid increased rate hike bets. Fed officials issued warnings on Friday regarding the likelihood of future rate hikes, even though the central bank had chosen to maintain interest rates at its policy meeting the previous week. As a result, markets estimate a roughly 21% chance of a 25-basis-point rate increase at the November meeting.

Meanwhile, the Canadian dollar experienced a slight decline against its US counterpart on Friday but managed to secure a weekly gain. This gain came from higher oil prices and the anticipation of additional interest rate hikes by the Bank of Canada. Consequently, it offset the impact of preliminary data indicating a decline in retail sales for August.

Shaun Osborne, the chief currency strategist at Scotiabank, noted, “Stronger-than-expected Canadian inflation data contributed to the CAD’s strength last week. The inflation data increases the likelihood of the Bank of Canada raising its policy rate again.”

Consequently, money markets are currently pricing a 45% chance of a rate increase at the Bank of Canada’s upcoming policy announcement on October 25. Moreover, they are fully expecting further tightening in the market by March.

Elsewhere, data on Friday indicated a 0.3% growth in Canadian retail sales in July compared to June. However, retail sales likely declined by 0.3% in August.

USD/CAD key events today

No significant releases will come from the US or Canada today. As such, the pair will probably experience a quiet trading session.

USD/CAD technical outlook: Indecision persists around SMA

USD/CAD 4-hour chart

The USD/CAD pair paused slightly above the 30-SMA on the charts. The price has been trading near the SMA line for some time, indicating a lack of clear direction. At the same time, the RSI is riding on the pivotal 50-mark, further showing the lack of direction. 

This pause comes after a bullish bounce from the significant 1.3400 support level. Bulls seemed ready to take control when the price broke above the 30-SMA. However, they failed to push beyond the 1.3501 resistance level. Another attempt could break above 1.3501 to retest 1.3550.

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