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  • USD/CAD falls to its lowest level since March after Fed’s decision.
  • The Federal Reserve leaves rates unchanged and reiterates commitment to act if needed.

The USD/CAD pair dropped sharply and struck fresh three-month lows after the Federal Reserve monetary policy decision. The dollar weakened and USD/CAD lost nearly 80 pips in a matter of minutes to hit its lowest level since March 2 at 1.3315. At the time of writing, the pair is trading at the 1.3340 area, 0.57% lower on the day.

Fed leaves rates unchanged, revises economic projections

The Federal Open Market Committee (FOMC) announced its decision to leave the target range for federal funds unchanged at 0-0.25% as widely expected. The Fed reiterated that it is committed to using its full range of tools to support the US economy and expects to maintain rates at record lows “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The Federal Reserve also revised its economic projections. The central bank now expects US gross domestic product to contract by 6.5% in 2020 and the unemployment to reach 9.3% by year-end. The so-called dot plot shows most policymakers expect interest rates to remain at current levels at least until 2022. 

USD/CAD technical view

The USD/CAD has been trending lower since hitting a three-year high of 1.4690 on March 19. The price trades below the significant 200-day SMA and the short-term technical picture remains bearish. However, oversold conditions suggest that an upward corrective move is due.

A break below 1.3315, March and June lows, could pave the way to 1.3202, February monthly low. On the other hand, bounces could find resistance at 1.3465, 200-day SMA, and then at 1.3500.

 

 

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