Can dovish Fed signals and Macklem comments pressure USD/CAD?

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US Dollar vs Canadian Dollar down 0.53%

Highlights

Diminished expectations for a Federal Reserve rate hike and softer US inflation reduce demand for the US dollar.
Bank of Canada Governor Tiff Macklem's hawkish remarks support the Canadian dollar as domestic inflation readings soften.
USD/CAD trades below key short-term averages with technical signals broadly negative, setting a short-term range of C$1.3966 to C$1.4106 and a high likelihood of further downside.

Fed caution and BoC hawkishness shift demand toward Canadian dollar

Expectations for a Federal Reserve rate hike have diminished, after cautious statements from Fed officials and softer-than-expected US inflation data, according to FXStreet. This shift has led to reduced demand for the US dollar, narrowing the interest rate differential against the Canadian dollar. Meanwhile, hawkish comments from Bank of Canada Governor Tiff Macklem, reported by Marketscreener, have supported the Canadian dollar even as domestic inflation figures softened.

Downside momentum strengthens as resistance holds and oversold signals emerge

On the hourly chart, USD/CAD is trading below the MA-20 at C$1.4084 and MA-50 at C$1.4107, while remaining above the MA-200 on the daily timeframe at C$1.3923. The Ichimoku Kijun level at C$1.408 acts as immediate resistance. Momentum signals remain negative, with MACD and ADX both confirming a sell bias. RSI is deeply oversold at 24.33, and both Stoch RSI and CCI also signal oversold conditions. Intraday, Bull/Bear Power and the Awesome Oscillator align with dominant seller momentum, with prices hovering near the session low and all oscillators confirming sustained downward pressure.

Range trading expected as rebound risks remain subdued

For the next 2 to 3 trading days, USD/CAD is expected to trade within a range of C$1.3966 to C$1.4106, reflecting typical volatility for current conditions. The probability of a rebound remains low, while the likelihood of continued downward movement is high. Sideways price action within this band is the baseline scenario; a bullish move would require a break above immediate resistance, while sustained weakness is likely if lower support is breached.

Anton Kharitonov, expert at Traders Union, sees consistent downside pressure on USD/CAD as both technical signals and fundamental shifts weigh against the dollar. He notes that weakening US rate hike expectations and the Bank of Canada's hawkish rhetoric favor the Canadian dollar. Short-term momentum and oscillators confirm a dominant sell bias. "Base case is for sideways to lower within C$1.3966 to C$1.4106 — no bullish setup unless price recaptures immediate resistance."

Earlier, analysts noted that the Canadian dollar's recovery was driven by shifting rate expectations and technical factors limiting the U.S. dollar's advance. The current setup, with renewed downward momentum and support from Canadian policy signals, highlights the importance of monitoring whether USD/CAD can hold above its longer-term support at C$1.3923 as the prevailing downside risk.

Source of Data: USD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.