The USD/CAD price analysis shows more upside potential as the Canadian dollar weakens ahead of the Bank of Canada policy meeting. At the same time, the currency fell amid a decline in oil prices. Meanwhile, the dollar firmed as investors awaited economic reports from the US.

Markets are gearing up for the Bank of Canada policy meeting, which is due later in the day. Investors expect the central bank to implement its second rate cut. Meanwhile, the Fed has yet to start lowering interest rates. 

BoC policymakers are more pressured to lower rates than other major central banks. Inflation in Canada has eased faster than expected and is currently within the central bank’s target of 1%- 3%. At the same time, the economy is quickly declining, with the latest retail sales report showing consumer spending is weaker than expected. Consequently, high rates are weighing on economic activity and must come down. 

This is not the case in the US. Inflation has taken its time to drop, and the economy remains resilient. Retail sales figures came in better than expected, indicating strong consumer spending. Although economists forecast two rate cuts in the US this year, they have noted that policymakers might remain cautious.

Meanwhile, the loonie was pressured when oil prices reached a six-week low in the previous session amid a higher likelihood of a ceasefire in Gaza. Furthermore, China’s economy has performed poorly in the second quarter, dimming the demand outlook for oil.

USD/CAD key events today

• BOC monetary policy report
• BOC rate statement
• US flash manufacturing PMI
• US flash services PMI
• BOC press conference

USD/CAD technical price analysis: Uptrend intensifies above 1.3750 barrier

USD/CAD 4-hour chart

On the technical side, the USD/CAD price has continued its bullish move, breaking above the 1.3750 resistance level. The move has now paused near the 1.3800 key psychological level. However, the bullish bias remains strong, with the price far above the 30-SMA. At the same time, the RSI is in the overbought region, indicating solid bullish momentum. 

Therefore, USD/CAD may only pause briefly before breaking above 1.3800. Even if it pulls back, it might not go below the 30-SMA. 

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