The USD/CAD pair continues to trade sideways below the key resistance level of 1.3600, with the focus shifting to the upcoming Federal Reserve policy meeting. Traders are divided over the potential size of the Fed’s interest rate cut, with speculation growing that the central bank may lower rates by 50 basis points. This uncertainty is keeping the Canadian Dollar under pressure, as the Bank of Canada is expected to embark on an aggressive easing cycle.
In the latest economic data, the University of Michigan reported better-than-expected Consumer Sentiment Index data for September, which rose to 69.0. Despite a recovery in oil prices, the Canadian Dollar remains weak as the BoC has already cut rates by 75 basis points and is expected to make further cuts in the near future. This outlook has led the USD/CAD pair to retrace towards the 200-day Exponential Moving Average, signaling a bearish near-term outlook.
Technical analysis shows that the pair is facing resistance at the 1.3590 level, with further upside potential towards the 1.3687 and 1.3738 levels if it breaks above the 1.3626 level. On the downside, support is seen at 1.3540 and 1.3500, followed by the September 6 low of 1.3466. The 14-day Relative Strength Index has shifted into bearish territory, further supporting a downward bias for the pair.
The Federal Reserve’s interest rate decision is a key economic indicator that influences the USD/CAD pair. The Fed sets interest rates to achieve its dual mandate of maintaining inflation at 2% and achieving full employment. Changes in interest rates impact the USD, with rate hikes strengthening the currency and rate cuts weakening it. The tone of the FOMC statement following the rate decision also plays a crucial role in influencing market sentiment.
The next Federal Reserve interest rate decision is scheduled for September 18, with expectations for a rate cut from the current level of 5.5%. The outcome of this meeting will likely have a significant impact on the USD/CAD pair, with traders closely monitoring the Fed’s decision and accompanying statement. The uncertainty surrounding the Fed’s rate cut size and the potential for further easing by the Bank of Canada will continue to drive volatility in the currency pair.
Overall, the USD/CAD pair remains range-bound below the 1.3600 level, with both fundamental and technical factors pointing to a bearish bias in the near term. Traders should pay close attention to the upcoming Fed meeting and any developments regarding the BoC’s monetary policy stance for further direction in the currency pair.
