The USD/CAD pair experienced fresh selling pressure during the Asian session on Wednesday, trading just below the 1.3600 level with a minor decline of less than 0.10% for the day. The pair remains within a familiar range established over the past week as traders await crucial central bank events to determine the next direction.
The US Federal Reserve (Fed) is set to conclude its two-day meeting later today, with a broad consensus expecting the initiation of a rate-cutting cycle. Market participants are particularly focused on the Fed’s economic projections and the ‘dot plot,’ which will significantly influence short-term US Dollar (USD) movements and impact the USD/CAD pair.
Despite a stronger-than-expected US Retail Sales report on Tuesday, which briefly eased concerns about a broader economic slowdown, the anticipated rate cut by the Fed overshadowed these positive figures. The market’s short-lived reaction to the retail data is attributed to the prevailing dovish expectations surrounding Fed policy.
On the downside, the USD/CAD pair appears to be supported by expectations of a larger rate cut from the Bank of Canada (BoC) next month. This support is reinforced by recent data showing that Canadian inflation reached the central bank’s 2% target in August. Additionally, a slight decline in Crude Oil prices may weaken the commodity-linked Canadian Dollar (Loonie), providing some cushion to the USD/CAD pair and suggesting caution for bearish traders.
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