As of October 13, 2024, the USD/CAD currency pair is under significant downward pressure, trading near the key psychological level of 1.35. This trend is influenced by the stark differences in the monetary policies of the Bank of Canada (BoC) and the U.S. Federal Reserve.
Monetary Policy Divergence
The Bank of Canada (BoC) is expected to announce its fourth rate cut of the year in an attempt to stimulate economic growth amid sluggish inflation and declining business activity. Canada’s central bank has been more aggressive in easing monetary policy compared to the U.S. Federal Reserve, which has adopted a more cautious approach. This divergence in policy has had a direct impact on the USD/CAD pair.
While the U.S. economy has shown resilience, the Fed is considering rate cuts due to slowing inflation and external risks, such as global economic slowdowns and geopolitical tensions. However, it has been more hesitant to act aggressively, unlike the BoC. This has led to a divergence in the yield spreads between the U.S. and Canada, favoring the U.S. dollar, but the broader risk-off sentiment in the market has weighed on the pair.
Technical Analysis
From a technical standpoint, the USD/CAD pair is facing key support levels at 1.35. Analysts suggest that if the price breaks below this level, it could trigger further declines, potentially testing lower support areas around 1.34.
