USD/CAD price holds steady below multi-year high as markets eye Fed decision
USD/CAD chart testing multi-year resistance at 1.4245
The USD/CAD pair trades near 1.4230 after touching a multi-year high of 1.4245 last Friday. Despite the strong rally, the pair has retreated slightly due to subdued US Dollar (USD) performance due to tempered US Treasury yields.
Market participants are closely watching the Federal Reserve’s (Fed) final policy meeting of 2024, where a 25 basis point rate cut is anticipated. According to the CME FedWatch tool, the market has nearly fully priced in this reduction.
USD/CAD chart (August 2024 - December 2024) Source: Trading View
BoC’s dovish stance weighs on CAD
The Canadian Dollar (CAD) remains pressured by the Bank of Canada’s (BoC) aggressive monetary easing. The BoC recently lowered its benchmark rate by 50 basis points to 3.25% and hinted at a slower pace of future cuts. Governor Tiff Macklem expressed concerns over the potential economic fallout from new tariffs on Canadian exports imposed by the incoming U.S. administration under President-elect Donald Trump.
Oil prices, a crucial factor for the CAD due to Canada’s oil-exporting economy, are offering limited relief. West Texas Intermediate (WTI) crude trades around $70.50 per barrel, supported by potential U.S. sanctions on Russia and Iran’s oil exports. US Treasury Secretary Janet Yellen signaled possible further restrictions targeting "dark fleet" tankers and even sanctions on Chinese banks to curb Russia's oil revenues.
With the Fed’s interest rate decision looming and geopolitical risks in play, USD/CAD’s next move hinges on monetary policy announcements and crude oil market developments. Traders should remain alert to any surprise policy shifts from the Fed or unexpected geopolitical escalations.
We previously highlighted USD/CAD's upward momentum driven by BoC's easing and U.S. inflation data, trends that continue shaping the currency pair's trajectory.
