The Canadian Dollar (CAD) advanced against the US Dollar (USD) on Thursday, gaining 0.2% as USD/CAD retreated from a three-week high. The move came after a fresh test of the 200-day Exponential Moving Average (EMA), with the pair facing technical resistance for the second time in three weeks.
US Consumer Price Index (CPI) inflation data for August came in roughly in line with expectations, fueling risk-on sentiment across markets and pressuring the Greenback. Despite firmer US price data, traders remain convinced that the Federal Reserve (Fed) will cut rates at its policy meeting next week.
CAD strength tied to weaker Greenback
The Loonie’s gains on Thursday were driven more by broad USD weakness than by domestic fundamentals. Canadian bond yields slipped midweek, further supporting sentiment, but the underlying economy remains fragile. With Canada still showing early signs of recession, markets continue to expect further policy easing from the Bank of Canada (BoC) in the months ahead.
Daily market movers
- CAD gained 0.2% after rebounding from earlier losses.
- US CPI inflation rose to 2.9% YoY in August, above the Fed’s 2% target but insufficient to derail rate cut bets.
- Fed funds futures continue to price in three rate cuts before year-end.
- BoC easing expectations could cap future CAD strength by limiting rate differentials.
- Technical reversals have left USD/CAD locked in a choppy trading range.
Canadian Dollar price forecast
Thursday’s rebound snapped a two-day losing streak for CAD, as USD/CAD once again failed to break above the 200-day EMA near 1.3870. The pair remains stuck in a consolidation zone, with medium-term momentum lacking a clear trend.
Upside resistance is seen at 1.3900 and 1.3950, while downside support lies at 1.3800 and 1.3750. Until either side of this range is breached, USD/CAD is likely to remain trapped in near-term technical swings.
