The USD/CAD currency pair is currently trading in a narrow range around 1.4400, reflecting muted trading activity due to a holiday-affected week. As traders look ahead, the US Dollar (USD) maintains a steady position, buoyed by expectations that the Federal Reserve will adopt a more cautious approach to interest rate cuts compared to other global central banks.
The US Dollar Index, which assesses the Dollar’s strength against six major currencies, remains just above the 108.00 mark. During its recent monetary policy meeting, the Federal Reserve indicated plans for two interest rate reductions in 2025. This sentiment reflects confidence in the overall economic conditions in the United States, coupled with an improving labor market that has outperformed initial forecasts.
In contrast, the outlook for the Canadian Dollar (CAD) appears more challenging. The Bank of Canada (BoC), continuing its trend of aggressive monetary easing, has slashed interest rates by a total of 175 basis points this year, bringing the rate down to 3.25%. Given the Bank’s concerns regarding rising economic risks, further rate cuts may be on the horizon.
The recent price action of USD/CAD highlights a robust trend following a breakout from an Ascending Triangle pattern on the weekly chart. The 20-day Exponential Moving Average near the 1.4000 level reinforces a bullish overall trend, while the 14-day Relative Strength Index (RSI) remains firmly in the bullish range of 60.00 to 80.00, indicating sustained upward momentum.
If bullish momentum continues, the pair could target the psychological resistance level of 1.4500, followed by the March 2020 high of 1.4668, should it surpass last week’s peak of 1.4433. Conversely, if the price falls below the December 11 low of 1.4120, it may find support at the December 4 high near 1.4080, and ultimately the key support level of 1.4000.
