USD/CAD Is Losing Ground Ahead Of Fed Decision

Key Insights

• Canada’s inflation exceeds analyst expectations. 
• In the U.S., traders will focus on Fed’s Interest Rate Decision. 
• A move above the 20 EMA will push USD/CAD towards the resistance at 1.2780.

Canadian Dollar Is Gaining Ground Against U.S. Dollar

USD/CAD is currently trying to settle back above the 20 EMA at 1.2750, while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has settled in the range between the support at 98.35 and the resistance at 98.70. In case the U.S. Dollar Index manages to get back above 98.70, it will move towards the resistance at the 99 level, which will be bullish for USD/CAD.

Today, foreign exchange market traders had a chance to take a look at the inflation reports from Canada. The reports indicated that Inflation Rate increased by 1% month-over-month in February, compared to analyst consensus of 0.9%. On a year-over-year basis, Inflation Rate grew by 5.7%, while analysts expected that it would increase by 5.5%. Core Inflation Rate grew by 4.8% year-over-year.

In the U.S., the Retail Sales report showed that Retail Sales grew by 0.3% month-over-month in February, compared to analyst consensus of 0.4%. On a year-over-year basis, Retail Sales increased by 17.6%.

The main event of the day for markets is the Fed Interest Rate Decision. Traders will likely focus on the comments of the Fed Chair Jerome Powell which will lay out the Fed’s view on inflation and the interest rate trajectory. Most likely, trading will be volatile during Powell’s speech.

Technical Analysis

USD to CAD found support near 1.2680 and is testing the resistance level at the 20 EMA at 1.2750. In case USD to CAD manages to settle above this level, it will move towards the next resistance, which is located at 1.2780.

A move above the resistance at 1.2780 will open the way to the test of the resistance at 1.2800. If USD to CAD climbs above this level, it will head towards the next resistance at 1.2830.

On the support side, the nearest support level for USD to CAD is located at the 50 EMA at 1.2725. If USD to CAD declines below this level, it will head towards the next support at 1.2680. A successful test of the support at 1.2680 will push USD to CAD towards the support at 1.2650.

For a look at all of today’s economic events, check out our economic calendar.