USD/CAD Price Forecast: Holds key 1.4300 level ahead of Fed's monetary policy decision

• USD/CAD stays above 1.4300 ahead of the Fed's monetary policy outcome at 18:00 GMT.
• Investors will keenly focus on the Fed's dot plot as the central bank is expected to keep interest rates steady.
• Traders are expected to reassess BoC's dovish bets due to hot Canadian CPI data in February.

The USD/CAD pair rises to near 1.4330 in European trading hours on Wednesday. The Loonie pair gains as the US Dollar (USD) rebounds ahead of the Federal Reserve's (Fed) monetary policy decision at 18:00 GMT. The US Dollar Index (DXY) advances 0.4% to near 103.70 after revisiting the five-month low of 103.20.

According to the CME FedWatch tool, the Fed is certain to keep interest rates unchanged in the range of 4.25%-4.50%. Therefore, investors will pay close attention to the Fed's dot plot and economic projections. In the December policy meeting, Fed officials collectively guided two interest rate cuts for 2025.

Investors will also focus on Fed Chair Jerome Powell's press conference after the policy decision to get cues about the impact of United States (US) Donald Trump's policies on the economic outlook. Lately, comments from a slew of US officials, including Trump, indicated that Trump's economic policies could lead to economic turbulence in the near term.

Meanwhile, the Canadian Dollar (CAD) is expected to face pressure from tariffs slapped by the US. Donald Trump has imposed a 25% levy on Canadian goods imported to the US but has provided some extension on those products that come under the purview of the United States-Mexico-Canada Agreement (USMCA).

On the domestic front, Canadian inflation has accelerated significantly in February, forcing traders to reassess their expectations for the Bank of Canada's (BoC) monetary policy outlook. On Tuesday, Statistics Canada reported that the annual Consumer Price Index (CPI) rose at a faster pace of 2.6%, compared to 1.9% growth seen in January.

USD/CAD holds above the 100-period Exponential Moving Average (EMA), which is around 1.4222, suggesting that the overall trend is bullish.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.

Going forward, an upside move above the March 10 high of 1.4470 will open the door toward the psychological resistance of 1.4500 and the January 30 high of 1.4595.

On the contrary, a breakdown below the February 14 low of 1.4151 by the pair would expose it to the December 9 low of 1.4094, followed by the December 6 low of 1.4020.

USD/CAD daily chart