One-week low: Canadian Dollar retreats against firm USD ahead of BoC and Fed

• A two-week high in the USD supports USD/CAD. The pair draws buyers for a second consecutive day.
• Despite firmer oil prices, expectations of a Fed rate rise and geopolitical risks support the safe-haven US dollar.
• The upcoming BoC and Fed rate decisions are traders' next focus for fresh directional signals.

USD/CAD extends this week's rebound from the 1.3970-1.3965 area. That region marked its lowest level since 16 September. Wednesday brings a second consecutive day of gains, with the pair pushing further above the mid-1.4000s to a fresh weekly high during Asian trading. Attention now turns to key central bank events.

A 25-basis-point (bps) rate rise is being priced in ahead of the Bank of Canada's (BoC) scheduled decision. The main focus, however, remains the conclusion of the two-day FOMC meeting and remarks from Federal Reserve (Fed) Chair Kevin Warsh. Thursday also brings major US economic releases: the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index. Traders will scrutinise both for further indications of the Fed's policy trajectory. That outlook will be an important driver of the US Dollar (USD), giving USD/CAD fresh impetus.

According to the CME Group's FedWatch Tool, traders have been assigning a probability of over 80% to another US rate rise in December. Elevated energy prices and the resulting inflation concerns underpin those expectations. Stalled US-Iran talks and fresh attacks on Saudi Arabia also sustain the geopolitical risk premium. This is helping the safe-haven USD draw buying interest for a fourth consecutive day. Firmer crude prices, however, could support the commodity-linked Loonie and restrain USD/CAD, suggesting bulls should remain cautious.

Several Gulf Arab countries were told by the US to prepare for a brief, intense military campaign against Iran after the 3 November midterm elections, The Wall Street Journal reported on Tuesday. Separately, the Iran-backed Houthis in Yemen claimed a direct ballistic missile hit on Saudi Arabia's defence ministry in Riyadh. With US–Iran negotiations stalled, concerns about a further escalation in the Middle East persist. These developments are helping crude attract renewed buying after a two-day correction from the multi-month high reached last Friday.

USD/CAD: -hour chart

Technical Outlook

Holding 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 outlook positive. The first upside barrier is the 38.2% Fibonacci retracement at 1.4095. Beyond that lie the 50% retracement at 1.4134 and the 61.8% level at 1.4173. Initial support sits at the 23.6% retracement at 1.4046, with the 100-period EMA at 1.4036 next in line. A more pronounced retreat would bring the structural floor near 1.3968 into view.

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