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USD/CAD Approaches 1.3800 Due to Diplomatic Market Sentiment and Expectation of Fed Interest Rate Decision

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  • May 7, 2025
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USD/CAD currency pair has risen towards 1.3800 since investors take a conservative approach following the Federal Reserve’s expected interest rate decision. Although the Fed is likely to leave rates unchanged, market focus is on comments by Chair Jerome Powell in light of existing trade tensions and political pressure from President Trump. The Canadian Dollar (CAD) is encountering some headwinds even as risk sentiment has improved in the wake of a joint press conference between Canadian Prime Minister Mark Carney and US President Donald Trump. Nonetheless, concerns about Canada’s domestic economic data, such as a sharp decline in the Ivey PMI, are dragging the CAD down. In the meantime, senior-level negotiations between US and Chinese officials will be held in Geneva, further complicating global trade dynamics. KEY LOOKOUTS • Market participants will be watching closely for the Fed’s interest rate move and Chair Jerome Powell’s remarks, especially on possible future rate cuts and the economic effects of continued trade tensions. • The result of US-Canada trade talks, particularly after the joint press conference between President Trump and Prime Minister Carney, will be instrumental for the CAD. Any news on tariffs or trade deals could have a strong impact on the pair. • The high-level meeting between US Treasury Secretary Bessent, Trade Representative Greer, and Chinese Vice Premier He Lifeng in the coming days may shift global trade sentiment, impacting the USD and CAD. • The steep fall in Canada’s Ivey PMI indicates diminishing business sentiment, and further dismal economic data will place extra stress on the CAD in the short term. USD/CAD pair moves towards 1.3800, market participants stay nervous in anticipation of the Federal Reserve interest rate decision, with market focus on Chair Jerome Powell’s remarks on potential rate cuts and their implications during the prevailing uncertainty over trade. The result of US-Canada trade negotiations, especially after the recent encounter between Prime Minister Mark Carney and President Donald Trump, is also a critical consideration, since any development or reversal in tariff negotiations may impact the CAD’s performance. Also, the high-level US-China trade talks scheduled this weekend might affect global risk sentiment, impacting both currencies in turn. At the same time, Canada’s weak Ivey PMI provides a hint that business sentiment may slow down, exposing the CAD to more downward risks if domestic economic indicators remain weak. USD/CAD currency pair is moving towards 1.3800 as market focus shifts to the Federal Reserve interest rate decision and US-China-Canada trade negotiations. Canada’s softening economic indicators, led by a steep decline in the Ivey PMI, put more pressure on the CAD. •  The pair is quoted at 1.3790, making up losses from the last session as the US Dollar strengthens. •   Market players are wary in front of the Federal Reserve interest rate decision, with the expectation of no change but increased focus on Chair Jerome Powell’s testimony. •   President Trump keeps putting pressure on the Fed for possible rate cuts, which shifts market mood. •  Recent Canadian PM Mark Carney press conference with US President Trump indicated positive negotiations, with more discussions to follow at the G7. •  US Trade Representative Greer and Treasury Secretary Bessent are sitting down with Chinese Vice Premier He Lifeng in Geneva in a breakthrough meeting of international trade tensions. •  Canada saw its business sentiment decline steeply in the April Ivey PMI. •  Gaining risk appetite across the world lifted the Canadian Dollar, even if global trade issues continue to put a strain on domestic concerns. Investors are keeping a close eye on events on several fronts as the USD/CAD currency pair stays flat in anticipation of major economic and political developments. The attention is mainly on the forthcoming Federal Reserve interest rate announcement, where markets expect nothing to change but remain sensitive to comments from Chair Jerome Powell, particularly against the backdrop of continuing trade tensions and political pressure from President Trump. These remarks are likely to offer hints on the Fed’s next policy course and how it will deal with inflation issues and world economic uncertainty. USD/CAD DAILY PRICE CHART CHART SOURCE: TradingView Aside from the Fed, the global trade dynamic is also largely influencing market sentiment. Top-level meetings are scheduled to be held in Geneva between US and Chinese officials as there are indications of easing trade tensions. In the meantime, US President Donald Trump and Canadian Prime Minister Mark Carney have engaged in renewed discussions on trade, providing guarded optimism. That said, Canada’s soft business activity readings, notably the recent Ivey PMI reading, challenge the momentum of the country’s economy, reflecting the delicate dance between forward progress externally and trouble internally. TECHNICAL ANALYSIS USD/CAD is proving resilient as it lingers close to the 1.3800 level,  a landmark psychological resistance area. A prolonged break over this level would indicate more bullish strength, even opening the doors to recent highs. On the bearish side, near-term support is currently at 1.3730–1.3750, where buyers had earlier stepped in. Traders will be awaiting a clear breakdown or rejection around 1.3800 in order to identify the next direction bias, considering that upcoming fundamental drivers such as the Fed decision will drive volatility in the markets. FORECAST USD/CAD pair breaks and holds above 1.3800 resistance level, it might reflect renewed bullish push, and have the possibility of testing higher levels of 1.3850 and possibly 1.3900 in short term. Such move may find support due to sustained demand for US Dollar with global uncertainty, dovish Fed tone, or soft Canadian economic indicators. Upside developments in US-China or US-Canada trade negotiations may also enhance investor sentiment in the USD, adding to the pair’s upward pressure. Conversely, inability to hold above 1.3800 may lead to a corrective pullback, with initial support at the 1.3750 region. A breakdown below this region may see further declines towards 1.3700 or even 1.3660 if risk appetite improves or Canadian data begins to show signs of recovery. Any dovish tone from the Fed or breakthroughs in trade talks that benefit the Canadian economy could also pressure the

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Currencies EUR/USD

EUR/USD Falls Below 1.0950 as Fed Decision Approaches Amid Strength in Dollar and Eurozone Trends

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  • March 19, 2025
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The EUR/USD crossed below the level of 1.0950 during Wednesday morning’s Asian trading, staying at around 1.0935 as market participants take a guarded approach ahead of the U.S. Federal Reserve interest rate determination. The U.S. Dollar received mild lift from more solid industrial production, contributing to traders’ expectation amid the Fed’s revised rate guidance and economic report. Although the central bank is expected to leave interest rates on hold, the press conference and dot-plot that accompany it could provide key policy guidance. Separately, a large spending budget passed by Germany’s parliament could support the Euro, indicating increased investment activity in the Eurozone’s largest economy. KEY LOOKOUTS • Markets watch for the Fed’s rate move and economic forecasts, which will determine the tone of USD movement going forward. • Robust US industrial production figures support the Dollar; additional strength could put pressure on EUR/USD below significant support levels. • Bundestag approval of a significant spending increase could underpin the Euro and restore investor confidence in the Eurozone economy. • Traders are cautious ahead of Fed commentary; increased volatility anticipated after the decision, affecting short-term EUR/USD direction. As the EUR/USD currency pair declines below 1.0950 in anticipation of the highly expected Federal Reserve interest rate decision, market players are keenly observing major events that may influence the near-term direction. The US Dollar has strengthened after positive industrial production figures, increasing hopes for a more aggressive Fed policy. Investors will closely monitor the Fed’s revised economic forecasts and the dot-plot, which may provide key information on the rate path ahead. In the meantime, Germany’s approval of a huge spending budget brings a possible Euro boost, signaling fresh fiscal support for the Eurozone’s biggest economy. Overall, sentiment is still wary, with volatility set to spike after the Fed announcement. EUR/USD falls below 1.0950 as traders wait for the Federal Reserve to make its interest rate decision and revise its economic forecasts. The stronger US Dollar and Germany’s recently approved budget plan are significant drivers of the pair’s movement. Volatility is likely to increase after the Fed announcement. • EUR/USD falls to about 1.0935 during Wednesday’s Asian session, falling below the 1.0950 mark. • Investors stay on guard in anticipation of the Federal Reserve interest rate announcement and economic forecasts later today. • The Fed will likely keep interest rates unchanged, but the dot-plot and press conference can give hints of future policy directions. • US Dollar appreciates slight strength as underpinned by better-than-expected US industrial production data for February (+0.7% MoM). • Germany’s parliament sanctioned a big spending spree, a sign of possible economic recovery in the Eurozone’s biggest economy. • Market sentiment remains divided, with investors in wait-and-watch mode following the Fed announcement. • Greater volatility anticipated in EUR/USD in the wake of the Fed verdict and reports on inflation projections. The foreign exchange market is in wait-and-watch mode with international investors awaiting the coming interest rate verdict of the U.S. Federal Reserve. Though the central bank is mostly expected to leave interest rates as they are, everyone is looking forward to the press conference and new economic projections for clues on the course of future monetary policy. The latest release of robust industrial production numbers in the U.S. has contributed to the expectation, signaling strength in the economy and adding to further interest in the central bank’s inflation and growth outlook. EUR/USD Daily Price Chart Chart Source: TradingView In the meantime, European developments have ushered in a tide of optimism, as Germany’s parliament passed a big-ticket spending plan designed to spur investment. The action is likely to underpin economic recovery efforts in the Eurozone’s biggest economy and potentially bolster market confidence in the region’s growth prospects. With traders waiting on the sidelines for key policy signals, the overall market tone is set by the interplay between U.S. economic vigor and Europe’s revived fiscal efforts. TECHNICAL ANALYSIS EUR/USD is picking up signs of mild weakness following its fall below the 1.0950 level, reflecting cautious market sentiment pre-Fed decision. The pair is now trading close to 1.0935, with near-term support at the 1.0900 psychological level. A break through this region may pave the way for further bear pressure. On the higher side, resistance is expected to be encountered in the 1.0975–1.1000 area, where sellers are likely to re-enter. Overall, the price action indicates a consolidation period, with investors waiting for a clear direction of breakout after major economic indicators from the U.S. Federal Reserve. FORECAST If the U.S. Federal Reserve keeps its policy statement and economic forecasts neutral or dovish, it may cap further gains in the U.S. Dollar. In this context, the Euro could find footing, particularly with Germany’s freshly approved budget plan set to fuel economic sentiment in the Eurozone. Better fiscal prospects in Europe could provide a supportive environment for the EUR/USD pair to move higher if global risk appetite also improves. Conversely, if the Fed hints at a more aggressive policy—i.e., the likelihood of rate hikes or a less aggressive sequence of easing—then the U.S. Dollar will likely pick up even more steam. This will potentially put downward pressure on the Euro, sending EUR/USD lower over the short run. Also, if future Eurozone data does not indicate a robust recovery in spite of Germany’s budget stimulus, market faith in the Euro will further deteriorate, exacerbating the downside risk.

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