- The USD/CAD outlook shows the dollar rising amid optimism over an extension of the US-China trade truce.
- China and the US agreed to extend their trade truce by another 90 days.
- Forecasts show that the annual US CPI figure might increase by 2.8%.
The USD/CAD outlook shows the dollar rising amid optimism over an extension of the US-China trade truce. However, traders remain cautious ahead of the pivotal US consumer inflation report that will shape the outlook for rate cuts.
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China and the US agreed to extend their trade truce by another 90 days, easing worries about another trade war. Trump had set August 12 as the deadline for a trade deal. However, there is still no clear deal between the two countries. Still, an extension of the truce means tariffs will remain relatively low as talks continue.
Meanwhile, the US CPI report due today met forecast except the year-on-year inflation ticked down to 2.7% against the expected 2.8%. Some experts believe the Fed will still cut rates in September despite the outcome. However, hot numbers would challenge the outlook for future moves.
“I think the Fed will go ahead and cut in September, partly due to political pressure and partly due to the softening labour data,” said Mike Houlahan, director at Electus Financial in Auckland.
“But it’ll be a conundrum for them (the Fed) if inflation starts to tick higher,” Houlahan said.
USD/CAD key events today
- Core CPI m/m
- CPI m/m
- CPI y/y
USD/CAD technical outlook: Bulls eye 1.3875 after taking back control
On the technical side, the USD/CAD price seems ready to make new highs after breaking above the 30-SMA. Meanwhile, the RSI trades above 50, suggesting solid bullish momentum. Therefore, the bullish bias is strong. However, bulls are still finding their feet above the SMA.
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Previously, bears had taken over when the price made a solid bearish candle near the 1.3875 resistance level. However, they failed to sustain the move below the SMA. Instead, the price bounced back when it got to the 0.5 Fib retracement level. This allowed bulls to take back control by breaking above the 30-SMA.
If bulls can keep the price above the SMA, it might climb to retest the 1.3875 resistance level. A break above this level would strengthen the bullish bias.
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