USD/CAD Exchange Rate Prediction – The Dollar Rallies Ahead of the Fed

The USD/CAD rebounded on Tuesday ahead of the Fed meeting announcement on Wednesday. The dollar moved higher against most major currencies. Market participants now perceived that the Fed will raise rates as soon as July and reduce its bond purchase program at this meeting in November.

Technical Analysis

The dollar rallied on Tuesday. The exchange rallied bouncing off suport near the 10-day moving average, 1.2365. Resistance is seen near the 50-day moving average at 1.2558. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is about to turn positive as the MACD (moving average convergence divergence) index is generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

 The Fed Finishes its Two Day Meeting on Wednesday

The Federal Reserve is expected to reduce its bond purchase program when it announces its monetary policy on Wednesday. Market participants forecast for the first-rate hike to September 2022 from December in the last survey.  The Fed is expected to reduce its $120 billion in monthly purchases of Treasurys and mortgage-backed securities by $15 billion a month, which would bring assets to an end by May.