USD/CAD bulls eye key trendline resistance after the Fed

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• USD/CAD has popped towards resistance and a bullish bias on the charts is eyed going forward. 
• A break of last week’s lows opens risk for a downside continuation. 

USD/CAD is sidelined on the front side of the bearish trend and has not been rattled by what was a rather benign outcome form the Federal Reserve meeting. The Fed, raised its interest rate decision by a 25 bps rate hike to 5.25-5.50%, as expected.

Federal Reserve statement, and key notes

• Fed says FOMC vote was unanimous.
• CBO revises 2023 us real Gross Domestic Product growth forecast to 0.9% from 0.1% forecast in Feb due to H1 labour market strength.
• Fed: Will consider extent of additional firming to curb inflation.
• Fed: We will continue to reduce our bond holdings as described in previously announced plans.
• Fed: Tighter credit conditions are likely to weigh on economic activity, hiring and inflation, extent to which remains uncertain.
• Fed: Recent indicators suggest economic activity has been expanding at a moderate pace vs a modest pace in June statement.
• Fed: We will continue to assess additional information and its implications for policy.
• Fed: Banking system is sound and resilient.

As a result of the statement:

• Interest rate futures put chance of Fed hike at 18% in September, 36.5% in November post-FOMC.
• Probability of Fed hike was 18.9% in Sept, 37.3% in nov pre-FOMC.

Analysts said the FOMC meeting was as expected, with Chair Jerome Powell “playing it close to straight down the middle” between hawkish and dovish on the rates outlook going forward.

Nevertheless, the US Dollar was nudged lower, as seen by the DXY index, a measure of the Greenback against six major peers. It fell 0.345% at 1.1093. 

USD/CAD daily chart

Consequently, USD/CAD popped towards trendline support and follow-through will see the price eyeing up overhead resistance as illustrated above. Should this hold, then there will be a focus on current support again. Overall, however, the price will be on the backside of the old bearish trendline and that leaves a bullish bias on the charts going forward. A break of last week’s and this week’s lows, however, opens risk for a downside continuation.