USD/CAD Buyers Cautious Ahead of BoC and FOMC Meetings
Market Overview
The US dollar (USD) is maintaining a cautious stance against the Canadian dollar (CAD) as traders await two highly anticipated central bank meetings—the Bank of Canada (BoC) and the Federal Open Market Committee (FOMC). These meetings are expected to provide critical insights into the monetary policy trajectory for both economies.
The Federal Reserve is widely expected to keep interest rates unchanged, with markets closely monitoring any forward guidance from policymakers. Investors are particularly keen to assess whether the Fed remains committed to maintaining restrictive monetary conditions or if it signals a shift towards rate cuts in March, given resilient consumer demand and persistent inflation pressures.
Meanwhile, the Bank of Canada is projected to reduce its benchmark interest rate by 25 basis points, bringing it down to 3.00%. The pace of easing from the BoC remains a focal point, as a more aggressive rate-cut cycle in Canada could further widen the interest rate differential in favor of the USD. This divergence in monetary policy may sustain upward momentum for USD/CAD, provided the Fed maintains a more hawkish stance than its Canadian counterpart.
Technical Analysis
USD/CAD remains within a broad consolidation range on the 4-hour chart, yet the breakout of a symmetrical triangle pattern to the upside suggests a bullish bias in the near term. The pair is currently testing resistance at 1.44152, a level that could serve as a key pivot for further gains.
If buyers manage to push beyond this level, the next upside targets lie at 1.44279, 1.44440, and 1.44618, aligning with key Fibonacci extension zones. However, a lack of sustained buying pressure at these levels may result in profit-taking, leading to short-term retracements.
Momentum indicators reflect a bullish tilt, with RSI hovering in positive territory and MACD signaling continued upside momentum. Moving averages are also supporting the uptrend, reinforcing the likelihood of further gains.
Conversely, a rejection at current resistance could encourage sellers to regain control. A drop below 1.43974 would indicate weakening bullish momentum, opening the door for deeper corrections towards 1.43686. A decisive break below this level would invalidate the bullish breakout and shift the focus back towards the broader consolidation range.
Key Technical Levels
- Resistance Levels: 1.44152, 1.44279, 1.44440, 1.44618
- Support Levels: 1.43974, 1.43686
Fundamental Factors
With monetary policy divergence in focus, the US dollar’s strength hinges on Fed rhetoric, particularly its stance on inflation and labor market conditions. If the Fed maintains a data-dependent, cautious approach, USD could remain firm against CAD.
For Canada, the BoC’s decision is crucial. A more aggressive easing cycle than expected could drive capital outflows from CAD-denominated assets, further weakening the currency. Additionally, oil price fluctuations remain a key driver for CAD, given Canada’s heavy reliance on energy exports.
Conclusion
USD/CAD remains bullish, with technical indicators suggesting further upside if resistance at 1.44152 is breached. However, the BoC-Fed policy divergence will dictate the next directional move. A more dovish BoC compared to the Fed could keep USD/CAD supported, while a stronger-than-expected CAD reaction may trigger short-term pullbacks.
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