• Markets indicate a roughly 55% probability of a 0.25% increase this month.
  • Canada’s inflation decreased significantly to 3.4% in May from 4.4%.
  • Canada’s GDP will likely grow at an annualized pace of 1.3% this year.

Today’s USD/CAD price analysis is bullish. While economists express greater confidence in another rate hike, financial markets indicate a roughly 55% probability of a 0.25% increase this month. 

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Notably, most economists surveyed by Reuters predict that the Bank of Canada will increase interest rates by 0.25% this month. This would bring the rate to 5.00%. Furthermore, it would amount to 475 basis points from March 2022, resulting in the highest overnight rate in 22 years. 

This decision follows a five-month pause earlier in the year and will likely hold until at least 2024. Previously, these economists had identified 4.50% as the peak rate. Still, the surprise move by the Bank of Canada in June highlighted the persistent presence of price pressures in an otherwise well-performing economy. 

In May, inflation decreased significantly to 3.4% from 4.4% the previous month. However, it remains well above the central bank’s 2.0% target and might not reach that level until early 2025.

The poll also suggests that the gross domestic product will likely grow at an annualized pace of 1.3% this year, up from 0.7% in an April poll. The median forecast indicates that the unemployment rate will average 5.4% in 2023, slightly above the current rate of 5.2%.

USD/CAD key events today

Investors are expecting the US monthly employment report. This report will shape the outlook for future Fed policy moves. Therefore, it will likely cause a lot of volatility in the pair.

USD/CAD technical price analysis: Buyers leap over resistance levels.

USD/CAD technical price analysis
USD/CAD 4-hour chart

The bias for USD/CAD on the 4-hour chart is bullish. The price shot up and now trades well above the 30-SMA. At the same time, the RSI rose to the overbought region, showing extreme bullish momentum.

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Bulls managed to break above resistance levels, including 1.3275 and 1.3350. The next resistance level is at 1.3400. If the bullish move continues, we might see the price reach 1.3400. However, bears might come in for a retracement before this happens as the price is overbought.

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Source: https://www.forexcrunch.com/usd-cad-price-analysis-markets-divided-on-july-boc-hike/