The downward trend will likely continue as sellers target the next key support at 1.2700.

Bearish View

• Sell the USD/CAD pair and set a take-profit at 1.2700.
• Add a stop-loss at 1.2850.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2850 and a take-profit at 1.2950.
• Add a stop-loss at 1.2750.

The USD/CAD price came under pressure on Monday morning as the US dollar weakness continued. The pair slipped to a low of 1.2800, which was the lowest level since June 13 of this year. It has fallen by about 3.15% below the highest point this year.

Canadian Dollar Comeback

The USD/CAD price had a mixed performance in July. The pair initially rose to a multi-year high of 1.3228 as the US dollar strength continued. It then made a major pullback as investors embraced a relatively risk-on sentiment.

In July, data from Canada revealed that the economy was going through some challenges. Inflation surged to the highest level in more than three decades because of the soaring oil and gas prices. At the same time, the labor market weakened in June as the economy lost over 30k jobs.

On a positive note, the unemployment rate dropped to about 4.7%. This was the first time it moved below the important 5% since the pandemic started. Further data revealed that the economic recovery is moderating.

According to Statistics Canada, output in June rose by just 0.1% after it stalled in May. As a result, the economy expanded by about 4.6% on a year-on-year basis. As such, analysts expect that Canada’s economy will start to moderate after it recorded substantial growth in the first half of the year. Analysts believe that the economy expanded by 2% in Q2.

There will be no economic data from Canada on Monday. As such, investors will focus on the latest manufacturing numbers from the United States. Economists expect data by S&P to show that the PMI slowed to 52.3 in July. The other reading by the Institute of Supply Management (ISM) is expected to have dropped from 53 to 52.0.

USD/CAD Forecast

The four-hour chart shows that the USD/CAD pair has been in a strong bearish trend in the past few days. As a result, the pair has formed a descending channel that is shown in purple. It has also moved below the 25-day and 50-day moving averages while the MACD remains below the neutral point.

The USD/CAD price has moved slightly below the 50% Fibonacci Retracement level. Therefore, the downward trend will likely continue as sellers target the next key support at 1.2700. A move above the resistance level at 1.2850 will invalidate the bearish view.

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The outlook is still bullish.

Bullish View

• Buy the USD/INR and set a take-profit at 79.63.
• Add a stop-loss at 78.58.
• Timeline: 1-2 days.

Bearish View

• Set the sell-stop at 78.74 and a take-profit at 78.0.
• Add a stop-loss at 79.50.

The USD/INR pulled back sharply on Thursday morning as the spectacular rally faded. The pair dropped to a low of 78.53, which was lower than this week’s high of 79.32. It is still remarkably higher than where it started the year at.

US Jobs Data Ahead

The Indian rupee has been in a strong sell-off against the US dollar as investors have embraced a more risk-off sentiment. They have favored moving to the relatively safer US dollar as risks of a recession rise amid the extremely hawkish Federal Reserve.

On Wednesday, minutes by the Federal Reserve showed that the bank was committed to continuing hiking interest rates in the coming months. Only one member of the committee – Esther George – opposed the giant 0.75% rate hike that happened in June.

The minutes also revealed that members were optimistic that they will implement another 0.75% or 0.50% rate hike in the coming meeting. All these actions, together with the performance of commodities, have increased the possibility of a recession. As a result, investors have moved to the safety of the US dollar.

The next key catalyst for the USD/INR price will be the upcoming US non-farm payroll (NFP) data that will come out on Friday. Analysts expect the data will show that the economy created more than 200k jobs in June while the unemployment rate remained at about 3.5%.

The pair will likely react mildly to estimates by ADP that will be published on Thursday. Historically, ADP numbers tend to have a significant divergence from the official ones. The US will also publish the latest export and trade numbers.

There is no scheduled economic data from India on Thursday and Friday and the next meeting by the RBI will be in August. Therefore, the USD/INR price will mostly be influenced by the US dollar.

USD/INR Forecast

The four-hour chart shows that the USD/INR pair has been in a strong bullish trend in the past few months as the rupee crashes. The pair is trading at 79, which is slightly below this week’s high of 79.33. In most periods, financial assets tend to consolidate or have a pullback as they near a key resistance level.

The pair is still above the 50-period moving average while the MACD has moved made a bearish divergence pattern. Therefore, the outlook is still bullish, with the next key price target being the second resistance of the standard pivot point at 79.64.