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USD/CAD Hits Key Resistance Ahead Of Key Economic Data & FOMC

USD/CAD is having a great week as the pair rallied by 1.32%. However, it has been unable to break through 1.383 resistance as the bears come into play above that level. At the time of writing, the exchange rate for the US Dollar to the Canadian Dollar stands at $1.382.

The rally in the DXY index seems to have paused as the index faces resistance from the upward trendline. The DXY, which is a measure of the dollar’s strength, gained 1.2% throughout the week as investors expected the war in the Middle East to tone down.

Earlier this week, the Bank of Canada kept the interest rates unchanged but warned about a potential hike despite the data pointing towards a weakening economy. This has acted as a tailwind for USD/CAD as the Canadian dollar weakened in terms of the greenback.

In the meeting, the officials also pointed out that slower progress to achieve price stability coupled with inflationary risks might force them to increase the rates in the future.

Side by side, Investors expect the Federal Reserve to maintain the high interest rates as the US economy remains resilient. According to data, the improvement in the Advance GDP, increase in home sales, and better PMI figures raised expectations of a hawkish approach adopted by the Fed.

USD/CAD Pair Forecast

The following chart of the USDCAD pair shows the price suffering a brief pullback after a strong rebound from the demand zone around 1.36. The bulls should be on the lookout for the 1.383 resistance level as the pair plunged 4% when the pair last retested it in March.

The USD/CAD forecast would flip bullish if it breaks above 1.383 resistance. In this case, I expect the exchange rate to find support at the demand zone below 1.36. This zone was a previous supply zone which may now have some buy orders set as it lies in confluence with the upward trend line which the pair has been respecting since October 2022.

USD/CAD outlook
USD/CAD Analysis