USDCAD traders brace themselves for a busy week ahead as a flurry of high-impact economic data releases are scheduled from both the United States and Canada. The Bank of Canada (BOC) meeting tomorrow is of particular interest, with markets currently pricing in an 80% chance of the first rate cut since the 2020 COVID-19 crisis. 

In 2022, following the rate cuts implemented during the COVID-19 shock, the BOC embarked on a rate-hiking cycle that began at 0.25%. Rates peaked at their current level of 5% in mid-2023. The bank has maintained these high rates for the past 13 months. 

Recent data suggests a gradual decline in inflation, which currently sits at 2.7%. Additionally, first-quarter GDP growth fell short of expectations by 0.5. This economic outlook strengthens the case for a potential rate-cutting cycle by the BOC. 

While the US economy is also experiencing a slowdown based on recent data, but it remains far from warranting any rate cuts, likely not until the final quarter of 2024. This week’s key data releases from the US include the ISM manufacturing report, factory orders, JOLTS job openings report, the official jobs report, and the European Central Bank (ECB) interest rate decision. All of these might significantly impact the value of the US dollar. 

(USDCAD Daily Chart) 

USDCAD has exhibited an upward trend since 2021, although its progress has been hampered by resistance at the 1.39 level, repeatedly. The technical indicators suggest a potential ascending triangle formation, with increasing pressure towards the upside. The decline of oil prices and a Bank of Canada (BOC) rate cut could further intensify this pressure, especially if the US dollar index remains resilient despite the influx of economic data from the US and the European Union (EU). While breaching 1.39 will be a significant challenge, a successful breakout followed by sustained price action above this level could see USDCAD target 1.45 in the coming weeks. Conversely, on the downside, 1.3575 and 1.34 remain the key support levels to monitor.