The USD/CAD currency pair has seen a slight decrease during the Asian trading hours on Tuesday, although it remains close to the peak it reached last week, which was the highest since April 2025. Currently, it hovers around the 1.4270 mark, with a strong US Dollar (USD) helping to mitigate further declines.
The USD Index (DXY), which measures the Greenback against a range of currencies, holds steady near an 18-month high, courtesy of the US Federal Reserve’s (Fed) aggressive approach and the intensifying conflicts in the Middle East. The Minutes from last week’s September FOMC meeting indicated that Fed officials still consider inflation the main threat to overall economic stability, supporting the likelihood of additional policy tightening.
Moreover, inflation concerns tied to fluctuating energy prices bolster market anticipations that the US central bank will raise interest rates by the end of the year, thereby supporting higher US bond yields. Additionally, the intensified fighting between the Iran-backed Houthis in Yemen and the Saudi coalition continues to contribute to geopolitical risks, favoring the safe-haven appeal of the dollar.
Conversely, the Canadian Dollar (CAD) is lagging largely due to the Bank of Canada’s dovish monetary stance, a slow domestic economy, and trade tensions with the US. However, a recent uptick in crude oil prices has provided some support to the commodity-dependent Loonie, which might be preventing traders from making new bullish moves on the USD/CAD pair.
Investors are likely waiting for the upcoming US inflation data—specifically the Consumer Price Index (CPI) and Producer Price Index (PPI) set to release on Wednesday and Thursday, respectively. Additionally, a speech by Fed Chair Kevin Warsh at the IMF and World Bank annual meetings in Bangkok this Friday could influence the USD and inject new momentum into the USD/CAD pair amidst a relatively bearish economic backdrop.
USD/CAD 4-hour chart
Technical Analysis
The USD/CAD pair remains within a trading range established since the beginning of this month, indicating a bullish consolidation phase after a strong rally from the September low. For a continuation of the short-term uptrend, the price needs to break above the $1.4300 resistance level.
On the other hand, if there’s a correction, potential buyers might step in near the recent swing low at 1.4240, with the lower boundary of the range at around 1.4200 following closely. If it convincingly breaks below that level, it could trigger selling pressure and lead to a more significant decline.
