USD/CAD Chart Analysis Following Bank of Canadas Rate Cut
Unlike the Federal Reserve, which opted to leave its monetary policy unchanged, the Bank of Canada cut its interest rate yesterday. According to Forex Factory, as expected by analysts, the Overnight Rate was lowered by 25 basis points from 3.25% to 3.00%.
According to Reuters:
The Bank of Canada reduced interest rates to support the economy ahead of anticipated US trade tariffs.
This weakened the Canadian dollar, as the gap between Canadian and US bond yields widened.
Market participants estimate a 41% probability that the Bank of Canada will cut rates again in March.
The depreciation of the Canadian dollar is also influenced by oil prices (one of Canadas key export commodities), which have fallen by over 8% since their mid-January peak.
Technical analysis of the USD/CAD chart indicates that the Canadian dollars exchange rate against the US dollar is forming a Megaphone pattern, with price action demonstrating the presence of selling pressure. On 21 January, sellers sharply pushed the price down from the psychological level of 1.4500, and yesterday, the price made a bearish reversal from 1.4450.
There is a possibility that seller activity could drive USD/CAD lower towards a key trendline (marked in grey) that has been forming since the second half of 2024.
Read more: https://fxopen.com/blog/en/oa-usd-cad-chart-analysis-following-bank-of-canadas-rate-cut/
Text source: Forex Trading Blog
