USD/CAD Bears Targeting 200-Day SMA

The USD/CAD currency pair has declined for three consecutive weeks, and technical analysis suggests it may soon test its 200-day Simple Moving Average (SMA) around 1.3850.

The recent decline in USD/CAD can be attributed to the strengthening of the Canadian Dollar (CAD), driven by broad US Dollar weakness and relatively stronger Canadian economic data, as well as elevated oil prices supporting the commodity-linked Loonie.

The Bank of Canada is expected to prioritize soft core inflation at its upcoming policy decision on September 2nd, according to TD Securities, which could allow it to maintain a dovish stance. The recent deceleration in core inflation measures and the output gap's gradual closure also support this assessment.