- I’m watching USD/CAD closely as volatility picks up with both U.S. and Canadian rate decisions.
- I expect the U.S. dollar to strengthen over time, with 1.38 as key support and 1.40 marking a bullish breakout.
The USD/CAD pair has been volatile during Wednesday’s session, which makes sense given that both the United States and Canada have interest rate decisions this week. Full disclosure, this analysis is before the FOMC decision in the United States. The Bank of Canada cut rates by 25 basis points but suggested they might pause further easing for now. The focus now shifts to what Jerome Powell will announce next.
Still Choppy in this Pair
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Over the longer term, I believe the pair moves higher, mainly because the U.S. continues to outperform Canada on nearly every economic metric. However, much depends on how the market reacts to the upcoming press conference. I’m watching the 1.38 level as a potential buying opportunity, while a break above 1.40 would confirm a bullish bias. The 200-day EMA is also on my radar, as many traders follow it closely, and a bounce from this region would make sense. Anything below 1.38 would signal a different scenario entirely.
Zooming out on the chart, the overall trend appears to be a gradual grind higher. We’ve already seen a brief higher high, and now we’re waiting to see if there are higher low forms. This pair remains interesting to watch, even though the carry trade effect isn’t major—it still favors the U.S. dollar for now.
Expect choppy volatility, which is normal for USD/CAD since much of its trading is necessity driven. Fundamentally, I remain negative on Canada’s outlook. The recent short-term strength in the Canadian dollar looks modest compared to the broader multi-month trend, which still leans against it. Ultimately, this is a pair that I am watching closely, as it looks ready to make a bigger decision.
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