USD/CAD remained steady on Wednesday after the Federal Reserve hinted towards a possible dovish approach. The Fed officials stated that there will be no need to raise interest rates further amid rising bond yields. At press time, the currency pair is trading at 1.3598 after a bounce from its weekly lows.
Due to a correction in the DXY index in the past few days, the USDCAD currency pair has suffered a 1.5% pullback. On Wednesday, however, the pair showed a 0.18% recovery as DXY rebounded after hitting the key level of $105.7 on its chart.
USDCAD Breaks The Losing Streak
The US treasury bond yield is extending its pullback as the yield rate suffered a rejection from the 16-year high level of 4.88% last week. According to the FED, interest rates will not be raised, if the bond yields keep rallying. However, if the US economy remains resilient and sees an uptick in inflation rates, the Federal Reserve might have to consider another rate hike in the medium term.
On Wednesday, the US announced its production price index numbers. The country reported a 0.5% increase in producer prices, destroying analysts’ expectations of 0.3%. Prior to the release of PPI data, CME’s FedWatch Tool showed an 89% probability of the Fed keeping the interest rates unchanged and an 11% chance of a 25bps rate hike in the next FOMC meeting.
The chart below shows the failure of USD/CAD to gain strength above the key supply zone of 1.3655 despite a breakout at the start of October 2023. Currently, the pair is consolidating 0.4% below the key supply zone after printing three consecutive red candles.
A 1% correction towards the 200 MA will be on the cards if the bulls fail to reclaim the 1.3655 supply zone in the coming weeks. The USD/CAD forecast will remain bearish until a reclaim of the 1.3655 resistance level. The pair may remain volatile this week as investors await the CPI numbers for September.