The Canadian dollar has gained significant ground against the US dollar, with the USD/CAD pair plunging to levels last seen in late July. This downward trend is primarily driven by expectations of an imminent interest rate cut by the Federal Reserve and a reassessment of recent Canadian inflation data.
While the initial market reaction to the inflation data was bullish, pushing USD/CAD higher, subsequent analysis has led to a more bearish outlook. The pair has now fallen to the 1.3600 support level, a crucial area for bulls since May.
Technical indicators support the bearish sentiment. The pair has experienced a sharp decline from its August 6th high, breaking through a key trendline and driving the RSI into oversold territory. A recent false breakout above the 1.385 support level further highlights the bearish dominance.
The upcoming FOMC meeting, scheduled for later today, will be a critical factor in determining the future direction of USD/CAD. If the Fed’s announcement aligns with market expectations of a rate cut, the Canadian dollar may continue to strengthen, potentially pushing the pair below the 1.3600 support level.
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