USD/CAD Movement and Interest Rate Speculations
The USD/CAD pair is experiencing a rise for the third day in a row, hovering around 1.4060 during the morning trading in Europe. Later today, the Bank of Canada (BoC) is anticipated to increase interest rates by 25 basis points.
Looking at the daily chart, the currency pair remains trapped within a falling wedge pattern, hinting at a possible bullish breakout as selling pressure begins to ease.
Nonetheless, there’s a near-term bearish sentiment with USD/CAD, as it trades below a tight range of Exponential Moving Averages (EMAs). The 50-day EMA sits near 1.4066, while the nine-day EMA is around 1.4068, both of which are acting as immediate resistance levels.
After struggling to maintain recent highs, the currency pair has dipped below these trend indicators. Additionally, the 14-day Relative Strength Index (RSI) hovering around 45 suggests that while bearish momentum is present, conditions are not yet oversold.
If the USD/CAD pair continues to decline, it could drop to the lower edge of the falling wedge near 1.3950. A break below this level could add further downward pressure, pushing it toward a five-month low of 1.3732 marked on May 21. Support is further located at 1.3481, the lowest point since October 2024.
Currently, the USD/CAD pair is facing immediate resistance at the combined levels of the 50- and nine-day EMAs, positioned at 1.4066 and 1.4067 respectively, which aligns with the upper boundary of the falling wedge. Should the pair break through this resistance, it could set its sights on an 18-month high of 1.4299 recorded on October 14.
Fed Poised to Hold Rates, December Hike Possible
Analysts at ABN Amro believe the Federal Reserve will not change rates in this week’s meeting, although they do see “some risk of hawkish dissents.” While they recognize that inflation is still concerning, they argue that “declining breadth and a cooler labour market provide the Fed with the ability to stay put.” They observe that the market has significantly reduced the chances of a hike in October, and December is not fully accounted for yet. Nevertheless, they anticipate one last 25 basis point increase in December before a prolonged pause.
