USD/CAD Exchange Rate Prediction – The Dollar Slides After Fed Decision

The dollar eased as the Fed kept interest rates on hold, which put pressure on the greenback. The Fed also said if the recovery in the United States continued to remain on track, they would consider removing some accommodation. Market pundits seem to believe that the Fed will begin its tapering of bond purchases in either November or December of 2021.

Technical Analysis

The dollar eased against the Loonie following the Fed Decision. The exchange rate hit resistance near an upward sloping trend line that comes in near 1.2910. Support on the exchange rate is seen near the 10-day moving average at 1.2710 and the 50-day moving average at 1.2607. The exchange moved from the overbought territory as the fast stochastic generated a crossover sell signal. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to a higher exchange rate.

The Fed Sees Growth Slowing

The committee now sees GDP rising just 5.9% this year, compared to a 7% forecast in June. However, 2023 growth is now set at 3.8%, compared to 3.3% previously, and 2.5% in 2023, up one-tenth of a percentage point. Projections also indicated FOMC members see inflation stronger than indicated in June. Core inflation is projected to increase 3.7% this year, compared to the 3% forecast the last time members indicated their expectations. Officials then see inflation at 2.3% in 2022, compared to the previous projection of 2.1%, and 2.2% in 2023, one-tenth of a percentage point higher than the June forecast.