Lower fuel costs lowered Canada’s July inflation. The BoC governor believes inflation is still too high. Investors will take a lot from Fed Chair Powell’s speech next week regarding monetary policy.

The weekly USD/CAD forecast is bullish as the pair might continue its rally next week with the dollar strengthening further. 

USD/CAD had an intense week with news releases from Canada and the United States. Official data released on Tuesday revealed that Canada’s inflation moderated marginally in July due to decreased gasoline costs, leading the central bank governor to comment that the annual rate may have peaked but will “remain too high for some time.”

Underlying price pressures indicated that another significant interest rate increase was possible. Bank of Canada Governor Tiff Macklem stated that inflation is still “far too high” in an opinion piece published on the National Post website following the release of the statistics.

Despite rising gasoline prices and increased sales at car dealerships, Statistics Canada data showed on Friday that Canadian retail sales rose 1.1% in June, surpassing estimates. However, sales were predicted to decline in July. Statscan, in a preliminary estimate, said it sees July retail sales falling 0.2%.

On the other hand, the US dollar soared last week after Fed officials emphasized the need for more significant interest rates to control inflation. This dollar rally saw USD/CAD closing the week higher.
In the coming week, investors will wait to hear what the Fed chair, Powell, will say in his speech regarding monetary policy. US GDP for Q2 is expected to grow from -1.6% to -0.8%.

Looking at the daily chart, we see the price trading above the 22-SMA with the RSI above 50, showing the trend is bullish. The price is heading for a strong resistance level that has stopped bulls several times. The 1.30258 level might cause a reversal to the downside.