The USD/CAD pair experienced a significant downward movement, reaching the crucial support level of 1.3300, following strong resistance around 1.3320 during the European session.
The Canadian Dollar (CAD) suffered a sharp decline, mirroring the performance of the US Dollar Index (DXY). Notably, the Canadian Dollar’s descent has been more rapid compared to the decline in the USD Index.
The resilience of oil prices is providing some support to the Canadian Dollar, as investors anticipate a neutral interest rate policy from the Federal Reserve (Fed). This positive market sentiment arises from the belief that the Fed’s decision to pause tightening measures will alleviate concerns of a recession in the United States.
Meanwhile, market participants are hopeful that the Bank of Canada (BoC) will continue raising interest rates due to the robustness of the Canadian economy. Surprisingly, BoC Governor Tiff Macklem raised interest rates by 25 basis points (bps) to 4.75% last week.
The USD/CAD pair has tested the support zone within the range of 1.3270-1.3300 on a daily basis. Following the Fed’s interest rate decision, the Canadian Dollar is expected to exhibit volatility. The presence of a downward-sloping 10-period Exponential Moving Average (EMA) at 1.3380 indicates an extremely bearish short-term trend.
The Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, indicating the presence of downward momentum.
If the asset breaks below the low of June 13 at 1.3286, bullish CAD traders will expose the Loonie to the low of November 15, 2022, at 1.3226, followed by the round-level support at 1.3200.
Conversely, a break above the high of June 08 at 1.3388 will drive the asset towards the high of June 05 at 1.3462 and the psychological resistance level of 1.3500.
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