USD/CAD pulls back into a major trendline ahead of the BoC and Fed decisions. What’s next?
FUNDAMENTAL OVERVIEW
USD:
The US dollar regained some ground to start the week as the prolonged US-Iran stalemate has taken oil prices back into triple digit levels.
That looks unlikely to change anytime soon as Trump has rejected Iran’s proposal to first open the Strait of Hormuz and then hold nuclear talks. Unfortunately, with US stock prices at all-time highs Trump might not feel any pressure to concede.
This might even set the stage for the next US dollar rally if the Strait of Hormuz remains closed for much longer and oil prices stay elevated, thus forcing the Fed to hike interest rates in the coming months.
Today, we have the FOMC policy decision and although the Fed is expected to keep everything unchanged amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to resilient US data and a longer than expected US-Iran war. A neutral Fed shouldn’t bring much volatility, but a more hawkish one could give the greenback a boost.
CAD:
On the CAD side, the currency has erased all US-Iran war losses as the bullish US dollar bets got unwound. Looking ahead, there are several risks for the CAD ranging from a hawkish BoC amid sluggish economy and the CUSMA renegotiations.
Today, we have the BoC policy decision where the central bank is widely expected to keep the policy rate unchanged at 2.25%. The central bank will likely maintain a cautious stance and a "wait and see" approach.
The BoC will also release new economic forecasts which are expected to mirror the other central banks' outlooks, with upward revision for inflation and downward revision for growth.
All in all, the decision is unlikely to bring much volatility as the central bank will likely stress data-dependency and avoid pre-committing to any rate path.
The market is pricing in a rate hike in the fourth quarter of 2026, so traders will focus on any change in tone and communication that could point to an earlier than expected rate hike or a strong pushback against market's pricing.
USDCAD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDCAD is consolidating right between the two major zones. If we get a pullback into the resistance zone around the 1.3750 level, we can expect the sellers to step in with a defined risk above it to position for a drop into the 1.3550 support. The buyers, on the other hand, will look for a break to open the door for a rally into the 1.39 handle next.
USDCAD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a major downward trendline defining the bearish momentum. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows. The buyers, on the other hand, will look for a break to extend the pullback into the 1.3750 resistance zone.
USDCAD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor upward trendline defining the current pullback. The buyers will have a better risk to reward setup around the trendline to position for a rally into the resistance, while the sellers will look for a break to increase the bearish bets into the 1.3550 support next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the BoC and FOMC policy decisions. Tomorrow, we get the monthly Canada’s GPD, US Q1 GDP, the US Employment Cost Index and the latest US Jobless Claims figures. On Friday, we conclude the week with the US ISM Manufacturing PMI.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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