- The USD/CAD forecast indicates a pause in the dollar’s rally.
- Treasury yields collapsed after a successful 10-year note auction.
- Fed policymakers believe rate cuts will be appropriate later in the year.
The USD/CAD forecast indicates a pause in the dollar’s rally after a sharp collapse in Treasury yields in the previous session. At the same time, the impacts of Trump’s new tariff threats were fading. Meanwhile, the FOMC minutes revealed that policymakers were ready to lower borrowing costs later in the year.
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The dollar lost its shine on Thursday as a drop in Treasury yields dragged it down. Yields collapsed after a successful 10-year note auction, which indicated high demand for Treasuries. This was a significant change from earlier in Trump’s administration, when investors were selling America.
Meanwhile, Trump’s new tariff threats had little impact on markets. As a result, the dollar was unable to sustain its rally. Despite announcing new tariffs, the US president pushed the deadline to August 1. This gives countries more time to negotiate better trading terms. Additionally, he stated that he was willing to extend this time to facilitate negotiations.
Furthermore, although Trump sent letters to some countries, he failed to send them to major ones, such as the Eurozone and India.
Elsewhere, the FOMC meeting minutes released on Wednesday revealed that policymakers believe rate cuts will be appropriate later in the year. This indicated a more dovish tone that weighed on the dollar.
USD/CAD key events today
- US unemployment claims
USD/CAD technical forecast: 1.3700 resistance triggers retreat
On the technical side, the USD/CAD price is pulling back after meeting the key resistance level at 1.3700. It trades above the 30-SMA with the RSI above 50, supporting a bullish bias. Therefore, the pullback might only retest the SMA before bulls regain momentum.
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The trend recently changed direction when bulls pushed above the 30-SMA and the bearish trendline. At the same time, the price broke above the previous high to make a new high. However, bulls have met solid resistance at the 1.3700 key level. This has allowed bears to trigger a retreat.
The bullish bias will remain if the price stays above the SMA. Moreover, USD/CAD is likely to bounce higher and retest the 1.3700 resistance. However, if the SMA gives way, the price will drop to retest the 1.3550 support level.
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