After starting the week with losses, the Canadian dollar has reversed directions on Tuesday. Currently, the pair is trading at 1.3371, down 0.05% on the day. There are no Canadian releases until Friday, so any movement from USD/CAD will be driven by events stateside, such as the Federal Reserve rate decision later on Wednesday.
Will the Fed implement more easing?
Later in the day, the Federal Reserve will announce its rate decision. The Fed is widely expected to leave the benchmark rate between 0-0.25%, so traders will be more interested in the rate statement. Fed Chair Powell has insisted that negative rates are not an option, but the Fed is likely to maintain an ultra-accommodative stance until the US economy shows unmistakable signs that it is on the path to recovery. This means that the Fed decision is likely to be a sleeper as far as the markets are concerned, unless the Fed surprises everyone with further easing measures.
The Fed has mobilized to steady the US economy in the wake of the Covid-19 pandemic. Policymakers slashed interest rates close to zero and have pumped trillions of dollars into financial markets. These easing measures have weighed on the US dollar and the Canadian dollar has also jumped on the bandwagon, gaining 5.0% since April 1.
USD/CAD posted slight losses in the Asian session. The pair showed limited movement in European trade and this trend has continued in the North American session
- 1.3560 is the next major line of resistance. Above, we find resistance at 1.3704
- 1.3311 is the first line of support, followed by support at 1.3206.