USDCAD corrects due to lack of new signals from U.S. Fed

The USDCAD currency pair stabilized near a three-month high on Wednesday as investors await new policy signals from the U.S. Federal Reserve (Fed).

Last week, the Fed left its interest rate at between 5.25% and 5.5% and kept its forecasts of three cuts by the end of the year.

Investors now await U.S. Core Personal Consumption Expenditure (PCE) Index data on Friday to gauge the potential timing of the central bank's monetary policy easing.

Traders are pricing in a 72% probability that the Fed will begin cutting rates in June, according to the CME Group's FedWatch Tool.

The recent weakening of the Canadian dollar is due to weak productivity growth, according to the central bank of Canada. According to senior deputy governor of the Bank of Canada Carolyn Rogers, businesses need to boost investment to increase productivity. This will help insulate the economy against inflationary pressures, Rogers added.

The Canadian central bank expects the domestic economy to barely grow this year, despite historically high population growth driven by immigration.

Still, a preliminary estimate on Tuesday showed that Canadian wholesale trade rose 0.8% in February from January. This slightly supported the Canadian dollar.

The USDCAD currency pair quotes are forming an upward corrective trend on the H4 timeframe. This trend has a limitation in the form of resistance at the level of 1.3610. Testing and pullback from this level occurred more than once, so the correction may take a rectangular form. The Relative Strength Index indicator (standard values) has entered the overbought zone, which portends a possible decline in the currency pair in the near future.

Signal:

The short-term outlook for USDCAD is to sell.

The target is at the level of 1.3455.

Part of the profit should be fixed near the level of 1.3535.

A Stop-loss should be placed at the level of 1.3760.

The bearish trend has a short-term character, so the trade volume should not be more than 2% of your balance.