• USD/CAD edged lower on Tuesday as expectations of rate cuts from the Federal Reserve underpinned the Canadian dollar ahead of key U.S. economic data later this week.
•Signs of slowing momentum in the U.S. economy, together with dovish guidance from Fed policymakers, have reinforced bets on a quarter-point rate cut next week.
• Investors are now focused on Friday’s PCE inflation data, seen as key to shaping expectations for the central bank’s rate call next week.
• Investor attention has also turned to the race to replace Jerome Powell at the Fed next year, with reports flagging Kevin Hassett as a front-runner and an announcement likely before Christmas.
• Traders are pricing in an 87.6% chance for a 25-basis-point interest rate cut in December, roughly doubling the odds from late last month, according to CME Group's FedWatch Tool.
• Immediate resistance is located at 1.4015(Daily high), any close above will push the pair towards 1.4041 (38.2%fib).
• Support is seen at 1.3956(50%fb) and break below could take the pair towards 1.3937(Lower BB).
Recommendation: Good to sell around 1.4000, with stop loss of 1.4080 and target price of 1.3920
