The USD/CAD pair drops to 1.3847 on Wednesday, down 0.15% following the BoC monetary policy decision. The CAD appreciates against the USD because the central bank decides not to change its policy rate, keeping it steady at 2.25%, in line with market forecasts. While the central bank maintains the same overnight rate, the policy statement notes that the economic situation is highly unpredictable at the moment. It notes that the conflict in the Middle East and tariff issues related to the US are rather volatile. Regarding domestic matters, the Bank of Canada notes that labour market demand remains weak and that some indicators suggest excess supply in the economy. This situation means there is little pressure to tighten monetary conditions in light of ongoing headwinds for the Canadian economy. On the other hand, the central bank seems to pay closer attention to the upside risk of inflation pressures. Nevertheless, new US tariffs and possible new steps create an uncertain environment for growth and recovery prospects. This dual risk of inflation and uncertainty about economic growth complicates monetary policy decision-making. The policy rate, maintained at 2.25%, enables the BoC to adopt a “wait and see” approach to evaluate the effects of these trade and geopolitical tensions on the Canadian economy. The focus will now shift to the Press Conference by Bank of Canada Governor Tiff Macklem. The markets would be interested in understanding whether the Bank of Canada views the current policy rate as accommodative or whether there is sufficient reason to change monetary policy.
The USD/CAD currency pair is trading at 1.3849 on the daily timeframe, trying to regain stability after a prolonged downward move since reaching a high above 1.4230 in June. The larger trend remains bearish as the pair continues to trade below the descending trend resistance levels and fails to breach the important moving average range of 1.3945 to 1.3985. However, the latest price moves have revealed that bulls are holding up the August low of around 1.3750, forming a small rebound and putting the market at an important crossroads. The move higher in price has brought it back into the 1.3845 range, which is now serving as immediate resistance. The breakdown above 1.3845 should be convincing enough to push prices higher towards 1.3905, then to the key resistance range of 1.3945 to 1.3985. The momentum oscillators are also conflicting. The MACD line remains below zero, signalling an overall bearish bias, even though the histogram has improved, suggesting that downside momentum is losing steam. The RSI line is near 43 and remains below the neutral 50 mark, indicating that sellers still have a slight edge in the market. The Stochastic oscillator has started rolling down from the overbought territory, signalling that the current reversal might not be sustainable unless more buyers get involved. The volatility bands are tightening after the drop, signalling consolidation, but rejection from the upper bound will strengthen the bearish intermediate-term bias. Support levels on the downside are seen at 1.3825 and 1.3790. Below these lines, we can see the recent low near 1.3750. This is the key support level for buyers because a daily close below this area will signal a continuation of the downtrend, with possible targets near 1.3710 and 1.3670. On the whole, the USDCAD pair still has technical vulnerabilities despite the recent bounce. It is encouraging that the rebound has started; however, it has not altered the overall bearish outlook. It will be important for buyers to get prices above 1.3845 and then overcome 1.3945 to have any real control. For sellers, it will be important to gain momentum once again if the pair falls below the current resistance level and gets below 1.3790.
