Canadian Dollar Prediction Following USD-CAD Plunge

• USD-CAD plunges to crucial support amidst the USD’s continued weakness.
• Bank of Canada governor Macklem hints at minor rate increases.
• Canadian inflation stats await next week.

CAD Outlook – Neutral

The Canadian Dollar presented a somewhat mixed performance within the previous week, regardless of the USD’s weakness. Other Loonie pairs fought as USD-CAD plunged. Meanwhile, the Canadian Dollar’s mixed performance the past week emerged as oil prices soared amidst re-opening updates from China.

Though the Loonie boasts a massive link with oil, some CAD pairs suffered from broader trends. Meanwhile, the economic calendar remains somewhat quiet for the Canadian economy in the coming week. October inflation data will emerge on Wednesday. And it might weigh massively on the CAD.

The BoC (Bank of Canada) opted to slow hikes following a highly frontloaded cycle amidst cooling Canada inflation data. Next week’s inflation numbers might trigger substantial volatility in Canadian dollar pairs if BoC reprices expectations.

Canada Economic Data

Toronto comments last week saw the Bank of Canada governor Tiff Macklem confirming that the bank was ready for smaller hikes. While emphasizing more rate increases, Macklem highlighted a ‘higher-than-usual step or resorting to normal 25bp moves.

Meanwhile, the comments emerged at a vital time, as the broad economic data prints slowing signals, whereas inflation remains steady. Central banks globally are facing this dilemma – how far should you go to contain inflation?

Besides last week’s remarks, Macklem commented on the Canadian ‘tight’ job market. He said the labor market should soften to reduce inflation, with the economy remaining in an excess demand phase. The BoC fights notable wage pressures amidst broader wage growth and elevated vacancies.

Canada added more than 100,000 jobs in October, whereas the unemployment rate stayed at 5.2%. The governor added that surged labor supply isn’t a substitute for utilizing financial policies to moderate demand and balance supply & demand.

The USD complex noted a massive move amidst hike expectations from the Fed after last week’s United States CPI data. Consequently, USD-CAG saw a break beneath 1.3500 before securing support during Friday sessions.

USD-CAD will likely benefit as more investors aim to drag the United States dollar lower. USD/CAD bears ensured a closing beneath the 100-dau MA at 1.3225. Meanwhile, the price eventually finds a foothold around September’s 1.3250 mark, and this zone might challenge bears ready to explore lower prices.