Canadian Dollar slides to one-week low vs firm USD as traders await BoC and Fed

USD/CAD attracts buyers for the second straight day as the USD advances to a two-week high.
Fed hike bets and geopolitical risks underpin the safe-haven buck, offsetting positive oil prices.
Traders now look forward to the key BoC and Fed rate decisions for a fresh directional impetus.

Haresh Menghani FXStreet

The USD/CAD pair gains positive traction for the second straight day on Wednesday, extending this week's recovery from the 1.3970-1.3965 region, or the lowest level since September 16. Spot prices climb further beyond mid-1.4000, hitting a fresh weekly top during the Asian session as traders now look to key central bank events.

The Bank of Canada (BoC) is scheduled to announce its decision amid bets for a 25-basis-point (bps) rate hike, though the focus will be on the outcome of a two-day FOMC meeting and Federal Reserve (Fed) Chair Kevin Warsh's comments. Moreover, Thursday's important US macro releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index – will be looked at for more cues about the Fed's future policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide a fresh impetus to the USD/CAD pair.

In the meantime, the CME Group's FedWatch Tool indicates that traders have been pricing in over an 80% chance that the US central bank will raise borrowing costs again in December amid inflationary concerns stemming from elevated energy prices. Furthermore, stalled US-Iran talks and renewed attacks on Saudi Arabia keep the geopolitical risk premium firmly in play, which assists the safe-haven USD to attract buyers for the fourth straight day. However, positive crude oil prices could benefit the commodity-linked Loonie and act as a headwind for the USD/CAD pair, warranting caution for bulls.

The Wall Street Journal reported on Tuesday that the US told several Gulf Arab countries to prepare for a short and intense military campaign against Iran after the November 3 midterm elections. Adding to this, Iran-backed Houthis in Yemen claimed that they targeted Saudi Arabia's defence ministry in Riyadh with a ballistic missile and that the hit was direct. Moreover, stalled US–Iran negotiations fuel worries about a further escalation of tensions in the Middle East, assisting crude oil prices to attract fresh buyers following a two-day corrective pullback from a multi-month top, touched last Friday.

USD/CAD -hour chart

Technical Analysis

The USD/CAD pair holds a constructive intraday bias above the 100-period Exponential Moving Average (EMA) on the 4-hour chart and the 23.6% Fibonacci retracement. Further up, initial resistance is aligned at the 38.2% Fibo. retracement at 1.4095, followed by the 50% retracement at 1.4134 and the 61.8% level at 1.4173. On the downside, immediate support is seen at the 23.6% retracement at 1.4046, ahead of the 100-period EMA at 1.4036. A deeper pullback would expose the structural floor around 1.3968.

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

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

AUD/USD jumps to 0.7050, fresh one-month top after hot Australian CPI

AUD/USD attracts buyers for the second straight day on Wednesday, rising to a fresh high since September 23 during the Asian session. A hot Australian CPI print reaffirmed bets for an imminent RBA rate hike in November and boosted the Australian Dollar. Meanwhile, the US Dollar pauses after a three-day rally to a near two-week high ahead of the crucial FOMC rate decision, lending additional support to the currency pair.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold drifts lower as USD hits two-week high ahead of FOMC decision

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