USD/CAD Strengthens on Lower Oil and Fed Expectations

Summary:

USD/CAD climbed above 1.4000 on Wednesday as optimism surrounding a potential US-Iran peace agreement pushed oil prices lower, weakening the Canadian Dollar. Investors are now awaiting the Federal Reserve's policy decision for fresh direction.

Buy USDCAD

End Time

CLOSED

1.40100

ENTRY

1.41000

TGT

1.39600

1.41348 -0.00008 -0.01%

175

Points

Profit

1.39600

1.40275

CLOSING

1.40100

ENTRY

1.41000

TGT

The US Dollar strengthened against the Canadian Dollar on Wednesday, with USD/CAD trading near 1.4005 as falling crude oil prices weighed on the commodity-linked Loonie ahead of the Federal Reserve's interest rate decision.

The Canadian Dollar came under pressure after renewed optimism surrounding a potential peace agreement between the United States and Iran triggered another decline in oil prices. As one of the world's largest oil exporters, Canada's currency tends to weaken when crude prices fall, providing support for USD/CAD.

Sentiment improved further after US Vice President JD Vance said President Donald Trump could unveil a preliminary agreement with Iran before the end of the week. The comments followed Trump's recent claim that a deal had already been signed, raising expectations that tensions in the Middle East may continue to ease.

The prospect of reduced geopolitical risks has encouraged traders to scale back concerns about supply disruptions, pushing oil prices lower and removing an important source of support for the Canadian Dollar.

Attention now turns to the Federal Reserve's policy announcement later in the day. Markets widely expect the central bank, under Chair Kevin Warsh, to leave interest rates unchanged at 3.50%-3.75%.

The combination of weaker oil prices and expectations for a steady Federal Reserve is keeping the bias tilted in favor of USD/CAD. However, the Fed's guidance on future policy could determine whether the pair can sustain gains above the key 1.4000 psychological level.

Technical Analysis

USD/CAD continues to trade with a clear bullish bias on the 2-hour chart, supported by a rising trendline that has guided price action higher since late May. The pair is currently holding near 1.4012, just above a key breakout zone around 1.3990–1.4000, suggesting buyers remain in control while price respects the broader upward structure.

The most important feature on the chart is the sequence of higher highs and higher lows, which confirms sustained bullish momentum. The pair recently broke above the 1.3990–1.4000 resistance zone, and this area has now turned into immediate support. As long as USD/CAD remains above this region and the rising trendline, the technical outlook favors further upside.

On the upside, the next key target is located around 1.4100, which aligns with the projected bullish move shown on the chart. A clean break above the recent high near 1.4020 would likely attract fresh momentum buying and open the door toward 1.4060, followed by the larger psychological target at 1.4100.

On the downside, initial support sits at 1.3990–1.4000. A break below this level would weaken the short-term bullish structure and expose the next support zone around 1.3930–1.3940, where price previously consolidated before the latest breakout. A deeper move below that region would suggest the uptrend is losing strength and could shift focus toward 1.3850–1.3860.

Momentum remains constructive, with price consolidating above former resistance rather than rejecting sharply lower. This suggests the current pause is more likely a continuation setup than a reversal. Unless sellers force a sustained move below the rising trendline, dips are likely to remain attractive to buyers.

TRADE RECOMMENDATION

BUY USD/CAD

ENTRY PRICE: 1.40130

STOP LOSS: 1.3960

TAKE PROFIT : 1.4100

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

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