USD/CAD Outlook: Loonie Set for Further Downside as Market Awaits Fed Policy and Trade Negotiations
USD/CAD remains pinned around 1.3575, indicating consolidation in anticipation of the much-expected Federal Reserve policy announcement. The market is widely expecting the Fed to leave interest rates at 4.25%-4.50% levels, thereby preventing any unusual market volatility. As for positive news on a prospective US-Canada trade agreement, the Canadian Dollar remains underperforming, with USD/CAD near its eight-month low. Bearish technical signals, such as falling EMAs and weak RSI, suggest possible downside towards the 1.3400 level, unless the pair can pull off a conclusive rebound above 1.3820. KEY LOOKOUTS • Markets watch out for the Fed interest rate statement, with a forecasted hold at 4.25%-4.50%, which can be relevant to USD volatility. • Hope of a trade deal between Trump and Carney can serve to back CAD if talks proceed as scheduled in the next 30 days. • A dip below 1.3540 might initiate further downfall towards 1.3500 and 1.3420, perpetuating the bearish trend. • 14-day RSI is still in bearish range (20-40), and all the major EMAs are in declining modes, indicating continuous selling pressure. USD/CAD currency pair stays bearish, trading at around 1.3575 as investors take a risk-off approach in the run-up to the Federal Reserve’s monetary policy statement. As much as a rate decision is expected to be held back, any indication of impending policy changes may inject some volatility into the US Dollar. Even as there is a favorable environment for the Canadian Dollar on account of a predicted trade agreement between Canada and the US, the Loonie remains underperforming. Technically, the bearish setup is still intact, and momentum gauges and EMAs suggest lower. A convincing fall below 1.3540 could set the stage for further losses towards 1.3500 and then 1.3420. USD/CAD fluctuates around 1.3575 as markets wait for the Fed rate decision. Even with trade deal euphoria, the Canadian Dollar lags. A fall below 1.3540 could lead to further losses toward 1.3400. • USD/CAD is trading around 1.3575, maintaining Monday’s range. • The Fed should keep interest rates at 4.25%-4.50%. • Investors are looking for policy cues from the Federal Reserve. • Canadian PM Carney and US President Trump target a trade agreement in 30 days. • Even with trade optimism, CAD trails other major currencies. • Technicals reveal a bearish pattern with all EMAs trending lower. • A decline below 1.3540 may send the pair to 1.3500 and 1.3420 support levels. The USD/CAD currency pair continues to be range-bound with market players looking ahead to the Federal Reserve interest rate decision later today. With general expectations of the Fed leaving its rate policy unchanged, investors are more interested in any forward guidance that would give clarity to future rate direction. This cautionary mood has seen the US Dollar firm up against its peers, including the Canadian Dollar, in advance of the mid-week policy declaration. USD/CAD DAILY PRICE CHART SOURCE: TradingView On the geopolitical side, events between Canada and the United States have captured the spotlight, including Canadian Prime Minister Mark Carney and US President Donald Trump’s commitment to seal a trade agreement within 30 days. Such an action would have significant consequences for North American trade patterns and investor sentiment. Even amid this seemingly rosy context for the Canadian economy, market responses have been muted as investors remain in wait for tangible advances on the trade horizon. TECHNICAL ANALYSIS USD/CAD remains bearish as the pair keeps trading below fundamental moving averages, with all short-to-long-term EMAs trending south—reflecting consistent selling pressure. The Relative Strength Index (RSI) continues to be weak, fluctuating between 20 and 40, reflecting that bearish momentum still prevails. A break below Monday’s low of 1.3540 would probably speed the downside movement, possibly pulling the pair towards the next important support levels of 1.3500 and 1.3420. Any rebound, though, above 1.3820 might change the near-term bias to bullish. FORECAST If USD/CAD penetrates the significant support at 1.3540, it might pave the way for more losses. The next strong psychological figure to monitor is 1.3500, with the September 25 low at 1.3420 coming next. Sustained bearish pressure, coupled with diminishing expectation of positive economic surprises in the US, may continue to fuel downward pressure in the near term. Conversely, a convincing bounce through the May 29 high of 1.3820 would confirm a reversal in sentiment and potentially turn the bearish structure of the pair around. This may set the stage for a test of the May 21 high at 1.3920 and ultimately the May 15 high at 1.4000, particularly if US economic conditions firm up or Fed commentary unexpectedly becomes hawkish.
