USD/CAD rallies to three-week high as BoC's dovish stance

• USD/CAD climbs above 1.3588, fueled by BoC Governor Macklem's dovish comments and falling oil prices from Tropical Storm Francine.
• BoC hints at more aggressive rate cuts as Canadian economy slows and unemployment hits a seven-year peak.
• Investors anticipate US CPI data, which could bolster expectations for a Fed rate cut at the upcoming September 17-18 meeting.

The USD/CAD rallied to a three-week high above the 200-day moving average (DMA) of 1.3588, gaining 0.36% after bouncing off the daily lows of 1.3553. The rally was weighed by the dovish comments of Bank of Canada (BoC) Governor Tiff Macklem and the drop in oil prices. At the time of writing, the pair trades at 1.3608.

USD/CAD climbs and surpasses 200-DMA, on BoC comments

Wall Street ended Tuesday's session with gains, while the US Dollar clings to minimal gains of 0.06%, according to the US Dollar Index (DXY), trading at 101.67.

BoC's Governor Macklem stated that deeper rate cuts could be appropriate and added that shifts in global trade may drive up prices.

In the meantime, the impact of tropical storm Francine sponsored a leg-down in oil prices as oil and gas producers shut off most installations as the storm advanced toward landfall in Louisiana.

The Canadian Dollar weakened since the Bank of Canada (BoC) was the first major central bank to slash rates amid fears of an economic slowdown. Last week, Canada's unemployment rate climbed to 6.6%, the highest in seven years, excluding the two years of the COVID-19 pandemic.

On the US front, investors are eyeing the release of the Consumer Price Index (CPI) in August, which is expected to confirm that the Federal Reserve might begin to cut rates at the upcoming September 17-18 monetary policy meeting.

USD/CAD Price Forecast: Technical outlook

From a technical perspective, the USD/CAD remains neutral biased, even though the pair has cracked the 200-day moving average (DMA) at 1.3589 and achieved a daily close above the latter.

Short term, momentum is tilted to the upside, though for a bullish continuation, the USD/CAD must clear key resistance levels. The next ceiling level will be August 22 and 23 highs at 1.3618, followed by the confluence of the 50 and 100-DMAs around 1.3667/75.

On the downside, the path of least resistance sees the first support at 1.3550. A breach of this level would expose 1.3500, followed by the September 6 low at 1.3465.