USD/CAD Retracts from Nearly 2-Month High

Yesterday, the USD/CAD exchange rate climbed above 1.3785 for the first time since mid-April.

However, today's USD/CAD chart shows that it failed to consolidate at this peak and has dropped to a weekly low.

These fluctuations might be interpreted as traders positioning themselves ahead of today's critical events. According to ForexFactory:

• At 15:30 GMT+3, US inflation data will be released;
• At 21:00 GMT+3, the Fed's interest rate decision will be announced;
• At 21:30 GMT+3, Powell's press conference will take place.

Technical analysis of the USD/CAD chart:

• The price made a false bullish breakout of the 1.3785 level, which is a bearish signal;
• The red arrow indicates a bearish engulfing pattern that formed during this failed breakout;
• The proximity to the psychological level of 1.3800 may have influenced the increase in selling pressure.

In any case, the USD/CAD rate is heading downwards today towards the triangle with its median around the 1.368 level, reflecting market sentiment ahead of the news. The 1.37370 level (former resistance) might provide market support.

What to expect?

Considering that the Bank of Canada and the ECB already cut interest rates last week (as we reported here and here), it is possible that the Fed will also lean dovish, continuing the rate-cutting cycle. If so, this could weaken the USD relative to other currencies.

Prepare for spikes in market volatility today.

Read analytical USD/CAD price forecasts for 2024 and beyond.

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