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Asset Watch
Tuesday, July 23, 2024
The Canadian dollar has weakened for the second consecutive week against the US dollar as markets brace for the Bank of Canada’s rate decision tomorrow. Investors expect the central bank to deliver its second rate cut of the year by 25 basis points and will tune into the BoC press conference for more insights and possible forward guidance regarding Canadian monetary policy.
Meanwhile, markets are awaiting the US PCE figures (the Fed’s preferred measure of inflation) for June, due at the end of this week. It is important to note that the market has already priced in a 25-basis point rate cut for the September meeting, and further softness in the inflation data could encourage investors to anticipate up to three additional 25 basis point rate cuts this year. Bloomberg forecasts the year-over-year PCE headline to fall from 2.6% in May to 2.4% in June, while the year-over-year core PCE is expected to decrease from 2.6% in May to 2.5% in June.
Chart Source: ADSS Platform
At the end of April, USD/CAD corrected lower, and since then, the price has moved sideways, forming lower highs and higher lows. Last week, the pair closed above the 50-day simple moving average, indicating a potential shift towards bullish sentiment.
Right now, the price eyes a test of the high end of the current trading zone spanning between 1.3851- 1.3589. A daily close above the high end of the zone could encourage bulls to extend the rally towards the 1.3900 mark. On the flip side, failure in closing above the high end of the zone suggests a continuation of the sideways move potentially sending the price to revisit the low end of the current trading zone.
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