**USD/CAD Holds Firm Near 1.3750 Ahead of Bank of Canada and Federal Reserve Policy Decisions**
*Adapted from an article by FXStreet’s Anil Panchal and supplemented with additional research.*
The USD/CAD currency pair continues to show resilience, trading steadily above the 1.3750 mark as traders focus on the upcoming interest rate decisions by the Bank of Canada (BoC) and the U.S. Federal Reserve (Fed). With both central banks set to hold their respective monetary policy meetings in the near future, volatility may increase, and traders are closely watching for any signals on rate trajectories, economic guidance, and inflation dynamics.
This article explores the recent USD/CAD performance, outlines the fundamental drivers behind the price action, and previews the likely outcomes of policy meetings. We also analyze key technical levels and broader macroeconomic parameters influencing the pair.
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### Recent Performance and Technical Outlook
The USD/CAD pair has managed to maintain its position above 1.3750, a key psychological and technical support level. Recent sessions have shown limited directional momentum as markets await critical monetary policy cues.
**Technical Snapshot:**
– **Current Price**: Approximately 1.3755 (as of last market close)
– **Support Levels**: 1.3730, 1.3700, and 1.3665
– **Resistance Levels**: 1.3785, 1.3800, and 1.3870
– **200-hour Moving Average**: Near 1.3725
– **Fibonacci Support (23.6% from recent uptrend)**: Around 1.3700
– **Relative Strength Index (RSI)**: Flat near 50, suggesting a lack of strong directional bias in the short term
The pair’s recent attempt to breach resistance near 1.3785 was met with selling pressure, while dips below 1.3730 have found buyers stepping in. These price dynamics indicate consolidation ahead of major central bank decisions.
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### Bank of Canada: Will There Be Another Cut?
All eyes are on the Bank of Canada’s upcoming rate decision, scheduled for this week. The BoC surprised markets in June 2024 by cutting interest rates by 25 basis points — the first rate cut since the pandemic began — bringing the benchmark overnight rate down to 4.75%. The key focus now lies on whether the central bank will follow up with another cut or maintain a pause.
#### Market Expectations
– **Probability of a Rate Cut**: Markets are pricing in a roughly 55% chance of a second 25 bps cut due to signs of slowing economic activity.
– **Inflation**: Canada’s Consumer Price Index (CPI) has moderated, with core inflation trending toward the BoC’s 2% target. Headline inflation for May 2024 came in at 2.7%, down from 3.1% earlier in the year.
– **GDP Growth**: Canadian GDP contracted slightly in Q1 2024 on a quarterly basis, amplifying market expectations of a rate cut to support growth.
– **Employment**: The labor market remains relatively resilient, but job gains have slowed in recent months.
### Key Considerations for BoC Policy
– **Housing Market Trends**: Canadian housing prices are showing mixed signals, stabilizing in major metro areas. The BoC previously indicated concerns over price inflation in this sector.
– **Exports and Global Demand**: As a commodity-exporting nation, Canada’s economy is sensitive to oil prices. Crude has recently traded above $80 per barrel, offering some support to Canadian exports.
– **FX Impact**: A rate cut would likely weaken the Canadian dollar, boosting USD/CAD further upward unless offset by dovish signals from the Fed.
BoC Governor Tiff Macklem has maintained a cautious tone, stating that the central bank remains “data-dependent.” Traders await any signal in the Bo
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