The USDCAD currency pair rate has stabilized near the yearly high, reached on July 29. The Canadian dollar was on track to end its longest losing streak in seven years against its US counterpart. It has to do with rising optimism surrounding a possible interest rate cut in the US. Investors' attention is focused on today's monetary policy decision by the Federal Reserve (Fed).
At the conclusion of the two-day meeting, the Fed is likely to hold rates steady. However, policymakers will probably lay the groundwork for a possible September rate cut. According to CME FedWatch, traders have already fully priced in a 25-basis-point cut in September.
Traders will also keep an eye on the ADP employment report due later in the day and Friday’s US non-farm payrolls report.
Meanwhile, the Bank of Canada has already begun an easing cycle. Last week, the central bank cut its benchmark rate for a second time since June, lowering it to 4.50%. Against this backdrop, speculators have raised their bearish bets on the Canadian dollar to a record level, data from LSEG and the US Commodity Futures Trading Commission (CFTC) showed on Friday. As of July 23, net short positions had increased to 161,603 contracts from 132,473 in the prior week.
At the technical level, the USDCAD currency pair quotes are forming an uptrend on the H4 timeframe. At the same time, the price is approaching a strong resistance level at 1.3900, which has been reversing the pair in a downward direction for two years. The Bears Power volumes (standard values) have moved into the negative zone, indicating a potential decrease in quotes.
Signal:
The short-term outlook for the USDCAD pair is to sell.
The target is near the level of 1.3730.
Part of the profit should be fixed near the level of 1.3790.
A stop-loss could be placed at the level of 1.3910.
The bearish trend is short-term, so trade volume should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
