USD/CAD Hits Weekly High Near 1.3840 as Traders Brace for FOMC Clarity

The U.S. Dollar climbs against the Canadian Dollar for the third day in a row, but upside momentum may stall as traders await key economic events and FOMC minutes.

The USD/CAD pair extended its rally for the third consecutive session on Wednesday, reaching fresh weekly highs around 1.3840. The move follows a steady rebound from recent lows near 1.3685, last seen in October 2024. Support for the U.S. Dollar (USD) comes from improving U.S. data, although long-term bullish conviction remains uncertain.

🔍 U.S. Dollar Benefits from Strong Economic Data

Tuesday’s upbeat U.S. economic releases eased recession fears, helping the Dollar Index (DXY) recover from monthly lows. Durable Goods Orders in April showed a smaller-than-expected decline, while U.S. Consumer Confidence surged by over 12 points, its biggest monthly gain in four years, according to the Conference Board.

These factors lent fresh support to the greenback, lifting the USD/CAD pair. However, persistent concerns over U.S. fiscal imbalances and rising expectations of Federal Reserve rate cuts later this year may limit further gains.

💼 Fed Policy Outlook & FOMC Minutes in Focus

Investors are cautiously positioned ahead of today’s release of the FOMC meeting minutes, hoping for more clarity on the Fed’s monetary policy path. Markets currently expect at least two 25-basis-point rate cuts before year-end, with the first potentially arriving in September.

Additional focus will shift to this week’s economic calendar, including:

U.S. Preliminary Q1 GDP (Thursday)
U.S. Core PCE Price Index (Friday)
Canada’s Monthly GDP Data (Friday)

These releases will be critical in shaping USD/CAD’s trajectory over the coming days.

🇨🇦 Canadian Dollar Finds Some Relief from Inflation and Oil

On the other hand, the Canadian Dollar (CAD) is drawing some strength from hotter-than-expected inflation figures, which lowered the odds of a Bank of Canada (BoC) rate cut in June. Rising crude oil prices, a major export for Canada, are also lending support to the Loonie, potentially capping USD/CAD’s upside.

📊 Technical Outlook

USD/CAD’s current momentum suggests strength, but key resistance at 1.3850 may act as a short-term ceiling. A decisive break above this level could open the door to 1.3900, while failure to maintain gains might pull the pair back toward 1.3760 support.

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