The USD/CAD pair strengthens during Friday’s North American session, pushing past the immediate resistance at 1.3800. The Canadian Dollar (CAD) remains under pressure as expectations rise that the Bank of Canada (BoC) may announce a significant 50 basis point (bps) interest rate cut at its upcoming monetary policy meeting on Wednesday.
Canada’s Consumer Price Index (CPI) dropped to 1.6% in September, falling below the BoC’s target of 2%, while labor growth and household spending have weakened considerably. This has fueled speculation that the BoC will implement its fourth consecutive rate cut, following the 75 bps reduction earlier this year to 4.25%.
Meanwhile, the US Dollar’s (USD) eight-day winning streak has paused as investors await more clarity on the Federal Reserve’s (Fed) rate cut trajectory for the remainder of the year. Markets currently anticipate two further 25 bps cuts in both November and December.
Technically, USD/CAD found strong buying interest after forming a Double Bottom around 1.3440 on the daily chart. The bullish reversal pattern gained confirmation with a breakout above the September 19 high of 1.3650. The pair’s outlook is further supported by a bull cross formed by the 20- and 50-day Exponential Moving Averages (EMAs) near 1.3600.
Additionally, the 14-day Relative Strength Index (RSI) is positioned in the bullish range of 60.00-80.00, signaling active upward momentum. If the pair decisively breaks above the 1.3800 resistance level, further upside targets include the April 16 high of 1.3846 and the Year-To-Date (YTD) high of 1.3945.
Conversely, a downside move below the September 19 high of 1.3650 could lead to further declines toward the May 16 low of 1.3600 and the September 13 high of 1.3538.
