• Data on Tuesday revealed that US retail sales jumped by 0.7% in November.

• Market participants are pricing a 97% chance of a Fed rate cut.

• Data revealed that inflation in Canada eased from 2.0% to 1.9% in November.

The USD/CAD price analysis indicates a resurgence in bullish momentum following another positive US economic report. Meanwhile, the Canadian dollar languished near a 5-year low, weighed down by political uncertainty and an unexpected decline in consumer inflation.

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Data on Tuesday revealed that US retail sales jumped by 0.7% in November, above estimates of 0.6%. The unexpected increase showed that consumer spending rose, indicating solid demand. The US economy has maintained resilience despite high borrowing costs, which has led to a more cautious tone among policymakers about the future. 

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Nevertheless, market participants are still pricing a 97% chance that the Fed will cut rates later in the day. However, it might be a hawkish cut due to a shift in the outlook for the economy and inflation. The dollar will keep climbing if policymakers signal a more gradual approach in 2025. Notably, the incoming Trump administration might reheat the economy, forcing the Fed to maintain rates at restrictive levels.

On the other hand, the loonie extended losses from the previous session due to political uncertainty. Canada’s Finance Minister unexpectedly resigned, leaving the country in a vulnerable position ahead of Trump’s tariffs. 

At the same time, data revealed that inflation in the country eased from 2.0% to 1.9% in November. As a result, markets are pricing another Bank of Canada rate cut in January.

USD/CAD key events today

• Federal Funds Rate
• FOMC Economic Projections
• FOMC Statement
• FOMC Press Conference

USD/CAD technical price analysis: Bulls Target Higher Resistance Levels

On the technical side, the USD/CAD price has broken above the 1.4301 resistance level to make a new high in the uptrend. At the same time, the RSI has jumped to the overbought region, indicating solid bullish momentum. The price is in a developed bullish trend, making higher highs and lows. Moreover, it has stayed above the 30-SMA, respecting it as a strong support.

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Both the price and the RSI have made higher highs. Therefore, bullish momentum has strengthened with the uptrend, increasing the chances that this trend will continue. The price might retest the 1.4301 level before climbing to the next hurdle.

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