USD/CAD Price Forecast: Holds 20-day EMA ahead of BoC-Fed policy announcement
- USD/CAD ticks higher to near 1.4000 as the Canadian Dollar underperforms its peers.
- Both the Fed and the BoC are expected to cut interest rates by 25 bps on Wednesday.
- The Loonie pair has held the key 20-day EMA for almost a week.
The USD/CAD pair trades marginally higher to near 1.4000 during the European trading session on Tuesday. The Loonie pair ticks up even as the US Dollar (USD) faces selling pressure, indicating significant weakness in the Canadian Dollar (CAD).
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | 0.04% | -0.56% | 0.06% | 0.09% | 0.00% | -0.13% | |
| EUR | 0.10% | 0.14% | -0.46% | 0.16% | 0.20% | 0.08% | -0.03% | |
| GBP | -0.04% | -0.14% | -0.61% | 0.03% | 0.06% | -0.02% | -0.17% | |
| JPY | 0.56% | 0.46% | 0.61% | 0.64% | 0.67% | 0.59% | 0.45% | |
| CAD | -0.06% | -0.16% | -0.03% | -0.64% | 0.03% | -0.05% | -0.19% | |
| AUD | -0.09% | -0.20% | -0.06% | -0.67% | -0.03% | -0.09% | -0.22% | |
| NZD | 0.00% | -0.08% | 0.02% | -0.59% | 0.05% | 0.09% | -0.13% | |
| CHF | 0.13% | 0.03% | 0.17% | -0.45% | 0.19% | 0.22% | 0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
The Canadian currency underperforms amid firm expectations that the Bank of Canada (BoC) will reduce interest rates in its monetary policy announcement by 25 basis points (bps) to 2.25% on Wednesday. This will be the second straight interest rate cut by the BoC.
BoC dovish expectations remain firm amid job market concerns despite the Canadian labor market data for September showing strong job additions and a steady Unemployment Rate. The jobless rate remained stable at 7.1%, but is significantly higher than full employment levels.
Meanwhile, the Federal Reserve (Fed) is also expected to cut interest rates on Wednesday by 25 bps to 3.75%-4.00%. Fed dovish bets have been prompted by deteriorating job market and moderate inflation growth.
USD/CAD trades inside Monday’s trading range around 1.4000. The near-term trend of the pair remains bullish as the 20-day Exponential Moving Average (EMA) acts as key support around 1.3985.
The 14-day Relative Strength Index (RSI) falls below 60.00, indicating that bullish momentum is over for now.
Going forward, an upside move by the pair above the October 14 high of 1.4080 would open the door towards the April 8 low of 1.4144, followed by the April 9 high of 1.4274.
On the flip side, the asset could slide towards the round level of 1.3600 and the June 16 low of 1.3540 if it breaks below the August 7 low of 1.3722.
USD/CAD daily chart
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Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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