Canadian Dollar edges lower vs firmer USD as bullish oil limits losses ahead of BoC, Fed

• USD/CAD bounces off the 1.4000 mark, though it lacks bullish conviction amid mixed fundamental cues.
• Sustained USD buying supports spot prices, though bullish oil prices underpin the Loonie and cap gains.
• Traders also seem hesitant ahead of the highly anticipated BoC and Fed rate decisions on Wednesday.

The USD/CAD pair attracts some dip-buyers near the 1.4000 psychological mark on Tuesday, reversing a part of the previous day's modest losses amid a broadly firmer US Dollar (USD). However, a fresh leg up in crude oil prices underpins the commodity-linked Loonie and caps spot prices as traders keenly await this week's key central bank events.

The Bank of Canada (BoC) is scheduled to announce its decision on Wednesday amid bets for a 25-basis-point (bps) rate hike, though the focus will remain glued to the outcome of a two-day FOMC meeting. Furthermore, investors will closely scrutinize Federal Reserve (Fed) Chair Kevin Warsh's comments during the post-meeting press conference for more cues about the future policy path ahead of important US macro releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday. This, in turn, will play a key role in influencing the USD price dynamics and provide some meaningful impetus to the USD/CAD pair.

In the meantime, traders seem convinced that the US central bank will raise borrowing costs again by the year-end amid inflationary concerns stemming from elevated energy prices. Furthermore, stalled US-Iran talks and renewed attacks on Saudi Arabia keep the geopolitical risk premium firmly in play, which assists the safe-haven USD to gain positive traction for the third straight day. This, in turn, might continue to act as a tailwind for the USD/CAD pair, warranting some caution for bearish traders before positioning for an extension of the recent rejection slide from the 1.4300 mark, or the highest level since April 2025, touched earlier this month.

USD/CAD 1-hour chart

Technical Analysis

The USD/CAD pair keeps a bearish near-term tone beneath the 200-period Exponential Moving Average (EMA) on the 4-hour chart, at 1.4070. Moreover, price action is now capped by a dense overhead band that starts at the 23.6% Fibonacci retracement at 1.4048 and extends toward the EMA, suggesting rallies are vulnerable while below these levels.

Further up, additional barriers emerge at the 38.2% retracement at 1.4097, followed by the 50.0% level at 1.4136 and the 61.8% retracement at 1.4176, ahead of 1.4232 and 1.4303. On the downside, initial support is seen at the Fibonacci anchor near 1.3969, where a break would open the way for a deeper correction within the broader bullish cycle defined by that structural low and the 1.4303 high.

(The technical analysis of this story was written with the help of an AI tool. Know more.)