Yesterday, financial markets were closely watching statements from central banks regarding interest rates, including the Federal Reserve and the Bank of Canada. According to Forex Factory:

→ The Federal Reserve kept the Federal Funds Rate at 3.75% by a majority vote. "The economy has once again surprised us with its strength," Powell said at the press conference. The Fed Chair also added that "our policy is in a good place".

→ The Bank of Canada left the Overnight Rate unchanged at 2.25%. In its official statement, significant attention was paid to the impact of uncertainty surrounding the trade agreement between Canada, the United States and Mexico (CUSMA).

Although there were no surprises and the central banks' decisions matched analysts' forecasts, the reaction of the USD/CAD pair was quite dynamic. After a spike in volatility, the exchange rate fell below the 2025 low. Moreover, on higher-timeframe charts, a bearish break of support is visible, with that support running through the lows of 2023–2025.

Technical Analysis of the USD/CAD Chart

On 19 January, when analysing the USD/CAD chart, we:

→ highlighted important signs of bullish weakness on the chart;
→ suggested that bears might seize the initiative and attempt a break of the local ascending channel (shown in blue).

Indeed, a bearish breakout occurred, after which the price formed a trajectory resembling an accelerating plunge (approximately −2.7% over 10 days). At the same time, there are grounds to assess the market within the context of a long-term downtrend (shown in red).

In this context, we see that the price is near the lower boundary of the channel, which may act as support and slow the decline. However, even if bulls attempt to form a rebound, they are likely to face significant difficulties, because:
→ the price fell aggressively from the median to the lower boundary and broke the December low with virtually no local recoveries;
→ the area around the 1.3650 level appears to be a key resistance zone.

Thus, the USD/CAD exchange rate reflects the broader January trend, in which the US dollar is under considerable pressure due to geopolitical and other factors. Notably, even Powell's comment about the "strength of the economy" failed to support the dollar. This suggests that the market may currently be driven not by past successes of the US economy, but by concerns about future uncertainty.

Source: FXOpen