**USD/CAD Price Outlook: Supported at 20-Day EMA as Bank of Canada and Federal Reserve Policy Decisions Loom**
*Source: Article originally written by FXStreet’s Christian Borjon Valencia*
The USD/CAD currency pair remains a focal point for forex traders as it navigates key technical levels ahead of two significant central bank policy announcements: the Bank of Canada (BoC) and the U.S. Federal Reserve (Fed). The pair is currently trading near the 1.3800 mark, supported firmly by the 20-day Exponential Moving Average (EMA). The Canadian dollar continues to experience headwinds as falling oil prices and mixed economic data increase uncertainty over the BoC’s direction.
This detailed outlook explores the USD/CAD technical setup, prevailing macroeconomic conditions, and upcoming events that may drive volatility in the currency pair.
## Current Technical Overview
As of the latest price action, the USD/CAD pair is maintaining a bullish undertone, primarily supported by:
– A solid base at the 20-day EMA, currently around 1.3775.
– Upper resistance forming near the psychological 1.3850 level.
– A longer-term ascending channel continuing to guide the pair higher since early October.
**Key Technical Indicators:**
– The RSI (Relative Strength Index) remains above the 50 mark, implying continued bullish momentum but with potential consolidation risks.
– MACD (Moving Average Convergence Divergence) indicators are also in positive territory, suggesting that buyers remain in control.
– A potential golden cross is forming as the 50-day EMA trends closer to crossing above the 200-day EMA, which could trigger increased momentum buying.
The technical picture remains constructive for USD/CAD, but traders remain cautious ahead of highly-anticipated central bank decisions. Minor retracements are likely unless there is a strong dovish or hawkish surprise from either the BoC or the Fed.
## Canadian Dollar Fundamental Drivers
The Canadian dollar (CAD) is relatively sensitive to a combination of domestic macroeconomic indicators and external commodity price behavior — particularly crude oil, given Canada’s role as a major oil exporter.
### 1. Crude Oil and CAD Correlation
– Oil prices have been under pressure amid concerns over slowing global demand and surging U.S. inventories.
– As of late October, West Texas Intermediate (WTI) crude has slipped below $82 per barrel, putting pressure on CAD.
– Historically, lower oil prices tend to reduce the appeal of the Canadian dollar due to its dependence on energy exports.
### 2. Bank of Canada Outlook
The BoC is set to deliver its monetary policy statement on October 25, and market participants are anticipating a hold decision. Key factors influencing the central bank’s stance:
– Inflation in Canada remains above the BoC’s 2% target but has shown signs of easing, with core CPI indicators moderating.
– Labor market conditions are gradually loosening, with rising unemployment figures and decelerating wage growth.
– GDP growth has slowed considerably, prompting questions over how much policy tightening remains warranted.
Economists from TD Securities and RBC expect the BoC to keep rates unchanged at 5.00%, but the tone of the policy statement will be critical. A dovish tilt could strengthen USD/CAD further, while a surprising hawkish message might offer CAD a temporary tailwind.
## U.S. Dollar Drivers & Fed Outlook
The U.S. dollar (USD) remains firm, supported by resilient economic data and market expectations for prolonged higher interest rates.
### 1. Federal Reserve Policy Expectations
The Fed is expected to maintain the federal funds rate at 5.25%–5.50% during its October 31–November 1 policy meeting. Key considerations:
– U.S. inflation, while elevated, has shown signs of disinflation, particularly in core metrics like PCE and CPI.
– Labor market data continues to reflect tight conditions, though recent job openings and hiring figures point to a possible cooling
Read more on USD/CAD trading.