Firm USD pushes Canadian Dollar to one-week low as traders await BoC and Fed

• Buying interest in USD/CAD extends into a second consecutive day, with the USD reaching a two-week high.
• Safe-haven demand and Fed rate-hike expectations support the US Dollar, outweighing the impact of firmer oil prices.
• Fresh direction now hinges on the key BoC and Fed interest rate decisions awaited by traders.

USD/CAD remains on a firm footing on Wednesday, advancing for a second consecutive day as attention turns to major central bank events. The pair is extending its recovery this week from the 1.3970-1.3965 region, its lowest since September 16. During the Asian session, spot prices move further above the mid-1.4000 area to reach a fresh weekly high.

While markets are pricing in a 25-basis-point (bps) rate hike ahead of the Bank of Canada (BoC) decision, the outcome of the two-day FOMC meeting and remarks from Federal Reserve (Fed) Chair Kevin Warsh will take centre stage. Attention will then shift to Thursday's key US economic releases, the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index, for further signals on the Fed's policy trajectory. That outlook will be an important driver of US Dollar (USD) price movements and offer USD/CAD a fresh directional cue.

Safe-haven demand continues to support the USD, which is drawing buyers for a fourth consecutive day as stalled US-Iran talks and fresh attacks on Saudi Arabia sustain the geopolitical risk premium. Rate expectations are also supportive: CME Group's FedWatch Tool shows that traders have priced in a probability of over 80% of another US central bank rate increase in December, with elevated energy prices fuelling inflation concerns. Firmer crude oil prices, however, could lend support to the commodity-linked Loonie and limit USD/CAD gains, suggesting bulls should remain cautious.

Crude oil is finding renewed buying interest after a two-day corrective retreat from the multi-month high reached last Friday, as the impasse in US–Iran negotiations raises concerns over a further escalation in Middle East tensions. On Tuesday, The Wall Street Journal reported that the US had told several Gulf Arab countries to prepare for a short, intense military campaign against Iran following the November 3 midterm elections. Meanwhile, Yemen's Iran-backed Houthis claimed a direct hit on Saudi Arabia's defence ministry in Riyadh with a ballistic missile.

USD/CAD: -hour price chart

What Do the Technical Levels Signal?

Trading above both the 100-period Exponential Moving Average (EMA) on the 4-hour chart and the 23.6% Fibonacci retracement keeps USD/CAD's intraday bias positive. The first upside hurdle is the 38.2% Fibonacci retracement at 1.4095; beyond this, resistance lies at the 50% retracement at 1.4134 and the 61.8% level at 1.4173. Immediate downside support comes from the 23.6% retracement at 1.4046, followed by the 100-period EMA at 1.4036. Should the pullback deepen, the structural support near 1.3968 would come into view.

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