USD/CAD Unfazed by BoC Rate-Cut Ahead of Fed Decision

US Dollar Outlook: USD/CAD

USD/CAD seems to be unfazed by the Bank of Canada (BoC) rate cut as it consolidates ahead of the Federal Reserve interest rate decision.

USD/CAD Unfazed by BoC Rate-Cut Ahead of Fed Decision

USD/CAD trades near the weekly high (1.4471) as the BoC lowers its benchmark interest rate to 3.00% from 3.25% at its first meeting for 2025, but it seems as though the central bank is nearing the end of its rate-cutting cycle as Governor Tiff Macklem and Co. acknowledge that ‘the cumulative reduction in the policy rate since last June is substantial.’

Join David Song for the Weekly Fundamental Market Outlook webinar.

In turn, the BoC may continue to adjust its forward guidance as ‘the economy is expected to strengthen gradually and inflation to stay close to target,’ but the transition in US trade policy may force the central bank to implement lower interest rates as ‘a long-lasting and broad-based trade conflict would badly hurt economic activity in Canada.’

US Economic Calendar

As a result, USD/CAD may continue to track the positive slope in the 50-Day SMA (1.4261) as the BoC pledges to ‘help the economy adjust,’ but more of the same from the Federal Open Market Committee (FOMC) may produce headwinds for the Greenback as the ‘median participant projects that the appropriate level of the federal funds rate will be 3.9 percent’ at the end of this year.’

With that said, USD/CAD may consolidate over the remainder of the month if the Fed prepares US households and businesses for lower interest rates, but the exchange rate may further retrace the decline from the monthly high (1.4517) as it still holds above the moving average.

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

• USD/CAD may attempt to test the monthly high (1.4517) as it carves a series of higher highs and lows, with a close above the 1.4460 (61.8% Fibonacci extension) to 1.4480 (100% Fibonacci extension) region opening up 1.4590 (78.6% Fibonacci extension).
• Next area of interest comes in around the 2020 high (1.4668), but failure to close above the 1.4460 (61.8% Fibonacci extension) to 1.4480 (100% Fibonacci extension) region may keep USD/CAD within the January range.
• Lack of momentum to hold above 1.4370 (50% Fibonacci extension) may push USD/CAD back towards the 1.4280 (38.2% Fibonacci extension) to 1.4299 (April 2020 high) zone, with the next area of interest coming in around the monthly low (1.4261).

Additional Market Outlooks

AUD/USD Susceptible to Negative Slope in 50-Day SMA

USD/JPY Outlook Hinges on Federal Reserve Rate Decision

GBP/USD Breaks Above Weekly Range to Eye Monthly High

Gold Price Rally Fizzles to Keep RSI Below Overbought Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong