The USD/CAD exchange rate retreated on Thursday after the latest US PCE and Canada GDP data. The pair retreated to a low of 1.3560, the lowest point since September 29th. It has crashed by over 2.45% from the highest point in November.

The USD to CAD pair retreated after the US published the latest personal consumer expenditure (PCE) data. According to the Bureau of Labor Statistics (BLS), the headline PCE index dropped from 0.4% to 0.0% in October. This drop translated to a YoY increase of 3.0%.

The core PCE, which excludes the volatile food and energy products, rose by 0.2% on a MoM basis and by 3.5% on a YoY basis. These numbers confirmed that America’s inflation was falling. 

They also verified that the Federal Reserve is succeeding in engineering a soft landing for the American economy. Besides, the latest GDP data published on Wednesday showed that the economy expanded by 5.2% in the third quarter.

Therefore, there is a likelihood that the Federal Reserve will start easing its interest rates in the coming months. If this happens, the bank will likely cut rates by 0.25% by the first half of the year. This explains why the US dollar index (DXY) has crashed hard in the past few weeks.

The US is not the only country where inflation is falling. Data published on Thursday revealed that the European inflation dropped sharply in November.

The USD/CAD exchange rate also retreated after the latest Canada GDP data. According to the country’s statistics agency, the economy expanded by just 0.47% in the third quarter. It then contracted by 0.3% on a QoQ basis.

USDCAD chart by TradingView

The daily chart shows that the USD/CAD exchange rate has made a bearish breakout in the past few days. This decline happened after the pair formed a rising wedge pattern, which is a bearish sign. 

The pair has also moved below the 50-day and 100-day Arnaud Legoux Moving Averages (ALMA). The two averages have started forming a bearish crossover. Also, the Relative Strength Index (RSI) has moved below the neutral point.

Therefore, the outlook for the pair is bearish, with the next level to watch will be at 1.3380, the lowest point on September 19th.

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