• USD/CAD bottomed at a daily low of 1.3270 and jumped to the 1.3350 area after Fed's decision. 
• The Fed skipped as expected, leaving the benchmark rate unchanged at the 5.00%-5.25% rate.
• The dot plots showed a median rate peak of 5.6%.

The USD/CAD recovered after the Federal Reserve (Fed) kept rates unchanged and revealed an upwards revision of the terminal rate to 5.6% suggesting that two more 25 basis points (bps) are likely. In the statement, they clarified that holding the rates in this meeting will allow the members of the Federal Open Market Committee to asses aditional information regarding its implication on monetary policy.

Follow our live coverage of the Fed's policy announcements and the market reaction.

US bond yields surge and stocks plunge after Fed’s decision

Reacting to the revised terminal rate, bond yields in the US recovered, which helped the US Dollar re-gain traction, fueling a spike of the DXY index to the 103.25 area, clearing daily losses. The 10-year bond yield jumped to 3.85% seeing a 0.64% increase. Simultaneously, the S&P 500 index (SPX) despite continuing to trade at its highest level since April 2022 reversed its course and cleared daily gains.

That being said, the focus now shifts to Fed Chair Jerome Powell’s conference, where investors will look for clues regarding forward guidance.

USD/CAD Levels to watch

Based on the daily chart, despite the daily reversal, the USD/CAD appears to be bearish in the short term, as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both suggesting that the sellers have control while the pair trades below its main moving averages. In addition, the 20-day Simple Moving Average performed a bearish cross with the 100 and 200-day averages suggesting that more downside may be on the horizon.

The multi-month low at 1.3260 level is key support for the USD/CAD. If breached, the price could see a steeper decline towards November 2022 lows at 1.3230 and towards the 1.3200 area. Furthermore, upcoming resistance for USD/CAD is seen at the zone at 1.3350 level, followed by the 1.3380 area and the psychological mark at 1.3400.

USD/CAD Daily chart