The USD/CAD pair retains its positive bias for the sixth straight day, trading near the 1.3930 area, a two-week high during the Asian session on Wednesday amid a bullish US Dollar (USD). Spot prices await a breakout through the 100-day Simple Moving Average (SMA) before the next leg up as the focus remains on the outcome of a two-day FOMC policy meeting.
The US Federal Reserve (Fed) is scheduled to announce its decision later today and is widely expected to raise interest rates by 25 basis points (bps) at the end of the September 15–16 meeting. Investors will further scrutinize updated economic projections, which include the so-called dot plot, and Fed Chair Kevin Warshs comments during the post-meeting press conference for more cues about the future policy path. The outlook, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the USD/CAD pair.
Heading into the key central bank event, the growing acceptance that the US central bank would stick to its hawkish stance amid oil-driven inflation risks remains supportive of surging US bond yields. Apart from this, escalating Middle East tensions help the safe-haven Greenback stand firm near a two-week high. The Canadian Dollar (CAD), on the other hand, is weighed down by the anticipated dovish policy stance from the Bank of Canada (BoC) and an escalating US-Canada trade war. This, in turn, is seen as another factor acting as a tailwind for the USD/CAD pair.
Meanwhile, crude oil prices consolidate near the highest level since May 20, touched on Tuesday, amid concerns about supply disruption in the Middle East. This could offer some support to the commodity-linked Loonie and hold back traders from placing fresh bullish bets on the USD/CAD pair. Hence, sustained strength and acceptance above a technically significant 100-day SMA barrier is needed to back the case for a further near-term appreciating move.
USD/CAD daily chart
Technical Analysis
The USD/CAD pair keeps a mildly bearish near-term tone as it sits just under the 38.2% Fibonacci retracement and the 100-day SMA confluence hurdle. A break above will be seen as a key trigger for bullish traders and pave the way for additional gains. On the downside, initial support emerges at the 23.6% Fibo. retracement at 1.3856, with a deeper cushion at the recent swing anchor near 1.3735.