USD/CAD Price Analysis: Refreshes nine-month low at 1.3140 as BoC prepares for more rate hikes

• USD/CAD has posted a fresh nine-month low at 1.3138 as USD Index looks bearish and the BoC is preparing for more rate hikes.
• Upbeat Canadian Retail Sales data has strengthened the chances of more interest rate hikes from the BoC.
• USD/CAD has faced immense selling pressure after a mean-reversion move to near nine-period EMA at 1.3272.

The USD/CAD pair has printed a fresh nine-month low at 1.3138 in the European session. The Loonie asset is facing immense pressure as investors are hoping that upbeat Canadian Retail Sales data has strengthened the chances of more interest rate hikes from the Bank of Canada (BoC).

Downside bias to the Loonie asset is also propelled by weakness in the US Dollar Index (DXY). The US Dollar Index (DXY) is testing territory below 102.00 as investors are expecting only one more rate hike by the Fed this year.

Economists at Rabobank expect the Fed to hike in July, a more moderate pace would imply skipping September and that would leave us with November as the meeting for the second hike. However, even the Fed’s own staff expects the economy to be in a mild recession by then. Therefore, we continue to leave a second hike out of our forecasts.

USD/CAD has faced immense selling pressure after a mean-reversion move to near nine-period Exponential Moving Average (EMA) at 1.3272 on a daily scale. The Lonnie asst has dropped below the horizontal support plotted around 1.3185, which has turned into resistance for the US Dollar bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00 which supports more weakness ahead.

Should the asset break below the intraday low at 1.3139, Canadian Dollar bulls would drag the asset toward 05 July 2022 high at 1.3084 followed by 18 July 2022 high at 1.3033.

On the flip side, a break above June 08 high at 1.3388 will drive the asset toward June 05 high at 1.3462 and the psychological resistance at 1.3500.

USD/CAD daily chart