The Federal Reserve and the BoC (Bank of Canada) are on this week’s event risk as market await the BoC interest rate decision and Fed Chair Powell testimony. With interest rate forecast continuing to contribute to driving volatility, the BoC is expected the pause its on their policy rates while the Federal Reserve will likely increase rates by a further 25 basis points.
The Federal Reserve Rate Probability
Bank of Canada (BoC) Policy rates Distribution
With interest rate differentials widening between the two currencies, any changes to the narrative or the repricing of new information could influence price action.
Although the Fed has remained hawkish over recent weeks, the remainder of the economic docket poses an additional threat for volatility for USD/CAD.
USD/CAD Technical Analysis
On the daily chart below, USD/CAD is currently testing the 1.36 psychological handle, settling around this zone over the past two sessions. With the two doji candles suggestive of indecision, a break of this zone could drive prices in either direction.
For bullish continuation to be probable, the Canadian Dollar would need to breach 1.365 and retest 1.370. However, if prices falter and trade below Fibonacci support around 1.356, bears may have the opportunity to push prices toward prior support at 1.346.
USD/CAD Price Chart (Daily)