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Fed Leaves Rates Unchanged USDCAD Continues South


USDCAD hits the lowest level since early March after Federal Reserve kept rates unchanged at 0% to 0.25% by unanimous vote, and will stay at those levels until the economy achieve the employment and stability targets. Interest rates will stay at the current near-zero levels until 2022.

Fed expects that the unemployment rate will fall to 6.5% at the end of 2021 and 5.5% at the end of 2022.
Fed will continue with the bond purchases at the current pace of $80 billion per month in Treasuries and $40 billion per month in mortgage-backed securities.

Here is some interesting points from the Feds statement for the June 2020 policy meeting:

“Fed is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

To support the flow of credit to households and businesses, overcoming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. Also, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.”

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USDCAD Price Analysis

The USDCAD is 0.35% lower at 1.3367, making fresh three month lows as investors continue to sell USD for riskier assets. The technical picture is clearly bearish and points to lower levels, but sellers have to be cautious as the RSI index is now at the oversold level and that might lead to a sharp rebound at least above the 200-day moving average.  

As traders are looking to lower levels, first support for USDCAD stands at 1.3315 the daily low. If the USDCAD pair breaks below 1.3315, the next support will be met at 1.3327 the low from March 4. The next target for USDCAD bears is at 1.3271 the low from February 26. 

On the other side, the first resistance for USDCAD stands at 1.3438 the daily high. If the USDCAD pair breaks higher, the next hurdle will be met at 1.3465 the 200-day moving average. In case the buyers continue to bid, the next resistance stands at 1.3503 the high from June 5.