The US Dollar (USD) extended downside movement against the Canadian Dollar (CAD) on Monday, dragging the price of USDCAD to less than 1.3150 ahead of the monetary policy announcement from the Federal Reserve. The technical bias, however, remains bullish because of a Higher High in the recent upside rally.

Technical Analysis

As of this writing, the pair is being traded near 1.3148. An immediate support can be seen around 1.3145, a major horizontal support ahead of 1.3100, the psychological number and then 1.3028, which is another key horizontal support area.

On the upside, the pair is expected to face a hurdle near 1.3200, the confluence of a horizontal resistance as well as the psychological number ahead of 1.3247, the swing high of the recent upside rally as demonstrated in the above chart. A break and four-hour closing above the 1.3247-50 resistance area could incite the renewed bullish momentum, validating an upside rally towards the 1.3300 region in the long run.

Fed Monetary Policy

The two-day Federal Open Market Committee (FOMC) meeting is due tomorrow. Investors are carefully waiting for the interest rate decision by the central bank of the world’s largest economy. There are some hopes that the Federal Reserve may announce a hike in benchmark interest rate. If it happens, the dollar would skyrocket, rallying USDCAD pair to more than 1.4000 in the near future. However, if the central bank  leaves interest rate unchanged once again, then it would be seen as bearish for the US Dollar and we could see continuity of the ongoing bearish trend in the USDCAD pair.

Trade Idea

Considering the overall technical and fundamental outlook, buying the USDCAD pair on dips still appears to be a good strategy in short to medium term.

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