USDCAD consolidates in sell zone on growing expectations of Fed rate cuts

The USDCAD currency pair stabilized near a one-week low as the release of U.S. Producer Price Index (PPI) figures increased the likelihood of a Federal Reserve (Fed) interest rate cut in 2024.

The US Bureau of Labor Statistics reported on Tuesday that the Producer Price Index (PPI) for final demand rose by 2.2% on a yearly basis in July, down from 2.7% in the previous month. On a monthly basis, the PPI increased 0.1%, while the core PPI (that excludes volatile food and energy components) missed estimates and remained flat during the reported month.

Following the release of the data, U.S. bond yields fell, as did the value of the U.S. currency.

Today's Consumer Price Index (CPI) for July is expected to show an acceleration in monthly inflation to 0.2%, while the annualized rate will likely slow to 3.2%. Retail Sales data will be released on Thursday.

Traders are becoming increasingly confident that the Fed will soon begin easing its monetary policy. The move is likely to come at the September meeting of the Federal Open Market Committee (FOMC). According to the CME FedWatch tool, markets are pricing in a 53.5% probability of a 50 basis point rate cut.

This week, macroeconomic news from the U.S. has a greater impact on the market than Canadian news, which is absent.

In terms of technical analysis, the USDCAD pair's quotes, after exiting the uptrend, show the formation of a new downtrend on the H4 timeframe. The volume of the Bears Power indicator (standard values) has moved into the negative zone, indicating a possible decline in prices.

Signal:

Short-term prospects for USDCAD suggest selling. 

The target is at the level of 1.3590.

Part of the profit should be taken near the level of 1.3655.

A stop-loss could be placed at the level of 1.3800.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.