US dollar rally continues but will be put to a big test this week. Fed will announce its monetary policy decision this week on Wednesday, 7:00 pm BST. Expectations got more hawkish following CPI reading for August but have since eased somewhat and a 75 basis point rate hike looks to be the base case scenario. There is no key data ahead of the meeting that could tilt expectations more hawkish. However, there is always scope for a surprise and decision as well as Powell's press conference at 7:30 pm BST will surely be source of volatility on the FX market. Apart from that Fed will also publish a new set of economic forecasts along with the dot plot.
USDCAD launch new week with a strong upward move and tests a key 1.3300.13350 area. This zone is marked with the upper limit of the upward channel, 50% retracement of post-pandemic drop and previous price reactions from the 2018-2020 period. Break above would result in painting a new 2-year high on the pair and hawkish Fed could provide fuel for it. CAD traders should also keep the Canadian CPI report for August on watch (Tuesday, 1:30 pm BST) as it may trigger some volatility as well. Two levels to watch in case of a break or pullback are marked with 38.2% retracement (support, 1.3050 area) and 61.8% retracement (resistance, 1.3600-1.3650).
USDCAD. W1 interval. Source: xStation5
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