Breaking support at 1.38 may push USDCAD down to 1.362

The USDCAD currency pair begins its third consecutive week of consolidation near the 1.38 level. So far, any attempt to rebound or pull back ended with a return to this mark, but in the following days the rate’s sideways movement may come to an end. Considering the news background, breaking through the support level at 1.38 and declining to 1.362 is more likely. Tomorrow’s events may contribute to this scenario.

On Tuesday, Canada's new Prime Minister Mark Carney and US President Donuld Trump are to meet in person in Washington for the first time. According to Carney, the countries’ trade relations will be the key point of the agenda. The head of the Canadian government expressed his hope for a constructive character of the negotiations, especially since there are already some signs of easing tensions between the US and China. It is highly likely that Carney negotiated for at least a reduction in Canada’s import duties.

Tomorrow, all market attention will be focused on the results of the third Fed meeting of the year. The consensus forecast does not assume changes in interest rates, Jerome Powell's speech will be much more important. Trump has abandoned his intention to seek the early resignation of the Fed Chair, but he is not likely to miss the opportunity to put more pressure on the central bank to ease monetary policy as soon as possible. According to analysts' expectations, borrowing costs will be reduced in the summer.

The working week will end with the publication of the Canadian labor market report for April. Similar statistics for the US, released last Friday, turned out to be quite strong despite pessimistic projections. The Canadian economy may also successfully resist the negative impact of trade tensions. In this case, the national currency will get support, and USDCAD will find a trigger to break through the level of 1.38 from top to bottom.

Consider the following trading strategy:

Sell USDCAD below the 1.38 level. Take profit – 1.362. Stop loss – 1.39.