1.4000 within reach: USD/CAD consolidates gains after Fed’s hawkish hike

The US Dollar reached resistance at the 1.4000 level against the Canadian Dollar on Thursday, after the Federal Reserve (Fed) raised interest rates and Chairman Kevin Warsh made a hawkish statement. The pair has since consolidated around this psychological level, trading just below 1.4000 at the start of the European session. The Fed's decision to maintain its inflation-fighting stance was well-received by the market, leading to a rally in the US Dollar across the board.

Short-term Treasury yields climbed, while longer-term yields dropped, with the benchmark 10-year yield falling below the 5% mark. As anticipated, the Fed increased its benchmark rate to the 3.75%-4.0% range, with Warsh emphasizing the bank's focus on price stability. This boosted expectations of further rate hikes this year, with the CME's Fed Watch Tool now assigning a near 90% probability.

The BoC is expected to keep its monetary policy unchanged until the end of the year, amid economic uncertainty from the US trade war. The technical analysis shows a bullish near-term bias for USD/CAD, with price near a resistance band formed by Fibonacci retracements and positive momentum indicators. The next targets are the 1.4050 level and early August highs at 1.4080. Downside support is anticipated at previous highs around 1.3940 and 1.3870.