- US gross domestic product (GDP) is likely to grow at an annual rate of 2% in the fourth quarter.
- The Bank of Canada kept its key overnight interest rate unchanged at 5% on Wednesday.
- Money markets fully expect central bank interest rates to be cut by 25 basis points in June.
The USD/CAD outlook on Thursday suggests a bullish outlook, with the dollar holding firm near six-week highs. Investors were eagerly awaiting GDP and other key data, seeking valuable insights that could provide clues about the outlook for U.S. interest rates.
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The first report on US gross domestic product (GDP) for the fourth quarter is expected to reveal an annualized growth rate of 2%. Additionally, the report could show that the U.S. avoided recession in 2023. Additionally, the report is likely to show a slowdown in inflation in the final quarter. This could raise expectations that a rate cut could occur in the first half of 2024.
Meanwhile, the Canadian dollar fell after the Bank of Canada kept its key overnight interest rate unchanged at 5% on Wednesday. Furthermore, he emphasized that the focus should shift from concerns about underlying inflation to considering the timing of interest rate cuts.
The Canadian Money Market expects a 25 basis point (bp) rate cut in June. The central bank removed language about the possibility of interest rate hikes from previous policy statements. However, Macklem later said that further rate hikes had not been ruled out.
Additionally, the BoC adjusted its growth outlook, expecting weak growth in the first quarter and a gradual recovery thereafter. Inflation is expected to remain at around 3% in the first half of 2024 and fall to 2.5% in the second half. Meanwhile, a return to the 2% target is likely to take place in 2025.
Today’s major USD/CAD events
- Increase US GDP quarter-on-quarter
- U.S. unemployment insurance claim
USD/CAD Technical Forecast: Bulls Make a Comeback
On the technical side, USD/CAD retested the 1.3525 resistance level after the bears failed at the 1.3425 support level. At the moment, the bulls are trying to resume the previous bullish trend. They are pushing prices above the 30-SMA and the RSI is above 50.
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Initially, the bears were trying to take control when the price fell below the 30-SMA. However, there was not enough strength to sustain below the 1.3425 support level, allowing the bulls to regain control.
Currently, the bulls are facing strong resistance. At the same time, the RSI is losing its bullish momentum at this resistance level. If it holds, the price will return to the support at 1.3425. On the other hand, if the bulls regain momentum, the bullish trend will continue.
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