Dollar Holds Ground Against Loonie as Fed Hike and Hawkish Message Fuel Rally

The US Dollar (USD) maintained its strength against the Canadian Dollar (CAD) on Thursday, fueled by the Federal Reserve's interest rate hike and Chairman Kevin Warsh's hawkish message. The USD/CAD pair accelerated its uptrend after the event and is trading close to the 1.4000 psychological level at the European session open.

The Fed confirmed its commitment to fighting inflationary pressures on Wednesday, raising its benchmark interest rate to 3.75%-4.0% range, and Chairman Warsh emphasized the bank's focus on price stability. This move prompted investors to price in further interest rate hikes before the end of the year, with the CME's Fed Watch Tool now pricing a nearly 90% chance of at least one more rate hike this year.

The Bank of Canada (BoC) is expected to leave its monetary policy on hold until the end of the year due to the uncertain economic scenario stemming from the trade war with the US. The technical analysis suggests that the rally might extend to 1.4160, with price action showing a corrective recovery in the shape of a Gartley pattern.