USD/CAD Analysis: Markets prepare for a Fed rate cut, putting pressure on the dollar
2025-09-15 19:44:10
USD/CAD fell slightly during the European trading session on Monday (September 15), trading around 1.3820. The weak US consumer confidence data released last Friday put bearish pressure on the US dollar, but investors were cautious about shorting the dollar before the Federal Reserve's decision on Wednesday.
Market participants have almost fully priced in a 25 basis point rate cut from the Federal Reserve on Wednesday. If this rate cut meets expectations, the impact on the dollar will be limited. However, any unexpected moves or statements could exacerbate market volatility.
Carol Kong, a foreign exchange strategist at the Commonwealth Bank of Australia, said, "The Federal Open Market Committee (FOMC) is expected to cut interest rates by 25 basis points this week. This expectation has been fully digested by the market, even over-digested. To have an impact on the exchange rate, Powell must release a dovish signal far exceeding market expectations and clearly hint at subsequent rate cuts. If the FOMC unexpectedly cuts interest rates by 50 basis points, it may also cause a sharp decline in the US dollar, unless he indicates that the possibility of subsequent rate cuts is limited."
Meanwhile, the Bank of Canada is also facing pressure to cut interest rates this week due to a weakening labor market. Markets also expect the Bank of Canada to cut rates by 25 basis points on Wednesday. Prior to this, Canada's August Consumer Price Index (CPI) is expected to show further slowing inflation, paving the way for a rate cut.
Technical Analysis
(Source: Yihuitong)
On the 4-hour chart, USD/CAD has fallen sharply from the key level of 1.3875, breaking below its 50-day moving average and a two-week rising channel, with no signs of stopping. The price is now awaiting a test of the 100-day moving average at 1.3817. A break below this level would send the price towards the 38.2% Fibonacci level at 1.3800, below which the 23.6% Fibonacci level at 1.3772 and the previous low at 1.3756 could be tested.
If the downtrend reverses, the price will move back inside the channel, while a renewed bullish momentum could push the price above the 1.3889 resistance level.
At 19:40 Beijing time, USD/CAD was at 1.3821/22, down 0.17%.
Market participants have almost fully priced in a 25 basis point rate cut from the Federal Reserve on Wednesday. If this rate cut meets expectations, the impact on the dollar will be limited. However, any unexpected moves or statements could exacerbate market volatility.
Carol Kong, a foreign exchange strategist at the Commonwealth Bank of Australia, said, "The Federal Open Market Committee (FOMC) is expected to cut interest rates by 25 basis points this week. This expectation has been fully digested by the market, even over-digested. To have an impact on the exchange rate, Powell must release a dovish signal far exceeding market expectations and clearly hint at subsequent rate cuts. If the FOMC unexpectedly cuts interest rates by 50 basis points, it may also cause a sharp decline in the US dollar, unless he indicates that the possibility of subsequent rate cuts is limited."
Meanwhile, the Bank of Canada is also facing pressure to cut interest rates this week due to a weakening labor market. Markets also expect the Bank of Canada to cut rates by 25 basis points on Wednesday. Prior to this, Canada's August Consumer Price Index (CPI) is expected to show further slowing inflation, paving the way for a rate cut.
Technical Analysis
(Source: Yihuitong)
On the 4-hour chart, USD/CAD has fallen sharply from the key level of 1.3875, breaking below its 50-day moving average and a two-week rising channel, with no signs of stopping. The price is now awaiting a test of the 100-day moving average at 1.3817. A break below this level would send the price towards the 38.2% Fibonacci level at 1.3800, below which the 23.6% Fibonacci level at 1.3772 and the previous low at 1.3756 could be tested.
If the downtrend reverses, the price will move back inside the channel, while a renewed bullish momentum could push the price above the 1.3889 resistance level.
At 19:40 Beijing time, USD/CAD was at 1.3821/22, down 0.17%.
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