Canadian Dollar Forecast: USD/CAD Tumbles as Fed Warns of Rate Cut

Canadian Dollar Outlook: USD/CAD

USD/CAD tumbles from a fresh monthly high (1.3919) as Federal Reserve Chairman Jerome Powell warns that ‘the shifting balance of risks may warrant adjusting our policy stance,’ with the weakness in the exchange rate keeping the Relative Strength Index (RSI) out of overbought territory.

Canadian Dollar Forecast: USD/CAD Tumbles as Fed Warns of Rate Cut

USD/CAD snaps the recent series of higher highs and lows as the speech by Chairman Powell fuels speculation for a rate-cut at the September meeting, and the RSI may show the bullish momentum abating as it pulls back ahead of 70.

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In turn, USD/CAD may continue to give back the advance from the monthly low (1.3722) as the Fed prepares to further unwind its restrictive policy, but little signs of a recession may lead to a greater dissent within the Federal Open Market Committee (FOMC) as Chairman Powell acknowledges that ‘neutral level may now be higher than during the 2010s, reflecting changes in productivity, demographics, fiscal policy, and other factors that affect the balance between saving and investment.’

With that said, USD/CAD may weaken over the remainder of the month if it fails to defend the rebound from the weekly low (1.3782), but the exchange rate may establish a new trend as it no longer trades within the June range.

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

• USD/CAD falls from a fresh monthly high (1.3919) to snap the bullish price series from earlier this week, and lack of momentum to hold above 1.3780 (23.6% Fibonacci extension) may lead to a test of the monthly low (1.3722).
• A move/close below the 1.3700 (38.2% Fibonacci extension) to 1.3710 (78.6% Fibonacci retracement) region brings 1.3630 (38.2% Fibonacci extension) on the radar, but the pullback in USD/CAD may turn out to be temporary should it hold above the weekly low (1.3782).
• Need a move/close above the 1.3940 (61.8% Fibonacci retracement) to 1.4000 (61.8% Fibonacci extension) zone to open up the May high (1.4017), with the next area of interest coming in around 1.4110 (50% Fibonacci retracement).

Additional Market Outlooks

EUR/USD Under Pressure After Failing to Test Monthly High

Australian Dollar Forecast: AUD/USD Approaches Monthly Low

Gold Price Falls Toward Monthly Low Ahead of Fed Symposium

GBP/USD Recovery Curbs Threat of Head-and-Shoulders Formation

--- Written by David Song, Senior Strategist

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