Why is the Canadian Dollar slipping against a stronger USD despite support from buoyant oil ahead of BoC, Fed?

Bullish conviction remains weak as USD/CAD rebounds from 1.4000 against a mixed fundamental backdrop.
Gains in spot prices draw support from persistent USD demand, but rising oil prices strengthen the Loonie and limit the upside.
With the keenly awaited BoC and Fed rate announcements due on Wednesday, traders also appear reluctant to commit.

USD/CAD recovers some of the previous day's modest decline on Tuesday as buyers step in near the psychological 1.4000 level, supported by broad-based US Dollar (USD) strength. The upside remains constrained, however, as another advance in crude oil prices lends support to the commodity-linked Loonie. Traders are also awaiting this week's crucial central bank events.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Wednesday brings the Bank of Canada's (BoC) policy announcement, with markets betting on a 25-basis-point (bps) rate increase. The outcome of the two-day FOMC meeting will nevertheless remain the main focus. Investors will also examine Federal Reserve (Fed) Chair Kevin Warsh's remarks at the post-meeting press conference for further guidance on the policy outlook. Those comments come ahead of Thursday's important US economic releases: the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index. Together, these developments will be central to the USD's price movements and provide a meaningful catalyst for USD/CAD.

For now, expectations among traders appear firmly tilted towards another increase in US borrowing costs by the year-end, reflecting inflation concerns linked to high energy prices. With US-Iran negotiations stalled and attacks on Saudi Arabia resuming, the geopolitical risk premium also remains firmly in place. This is helping the safe-haven USD advance for a third consecutive day. Continued support from the dollar might therefore favour USD/CAD, suggesting bearish traders should exercise caution before positioning for a further decline following the recent rejection from 1.4300. Reached earlier this month, that level was the highest since April 2025.

USD/CAD: 1-hour price chart

What Do the Technical Levels Signal?

Trading below the 200-period Exponential Moving Average (EMA) at 1.4070 on the 4-hour chart leaves USD/CAD with a bearish near-term bias. A closely packed resistance zone now stretches from the 23.6% Fibonacci retracement at 1.4048 towards the EMA. As long as the pair stays below this band, recovery attempts remain vulnerable.

Beyond that zone, resistance lies at the 38.2% retracement of 1.4097, then at the 50.0% level of 1.4136 and the 61.8% retracement of 1.4176. The next barriers stand at 1.4232 and 1.4303. Initial support, meanwhile, lies near the Fibonacci anchor at 1.3969. A breach of this level would clear the path for a more pronounced correction within the wider bullish cycle, whose boundaries are that structural low and the 1.4303 high.

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

Economic Data Indicator

What Does the BoC Interest Rate Decision Mean?

At the conclusion of each of its eight scheduled annual meetings, the Bank of Canada (BoC) announces its interest rate decision. A view that inflation will exceed the target signals a hawkish stance and leads the BoC to raise rates to bring inflation down. Higher rates encourage greater foreign capital inflows, making this positive for the CAD. Conversely, if the BoC expects inflation to drop below target, its stance is dovish: it cuts rates to stimulate the Canadian economy in the hope of lifting inflation again. By discouraging foreign capital inflows into the country, this is negative for the CAD.

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Upcoming release: Wed 28 October 2026 13:45

Release schedule: At irregular intervals

Consensus estimate: 2.5%

Prior reading: 2.25%

Data source: Bank of Canada