USD/CAD traded with a mild downside bias on Wednesday ahead of the Bank of Canada (BoC) rate decision at 13:45 GMT. The pair was near 1.3672, with the Canadian Dollar supported by rising oil prices.
The US Dollar held small gains ahead of the Federal Reserve decision at 18:00 GMT. The US Dollar Index was about 98.70.
Central Bank Decisions In Focus
Both central banks are widely expected to keep rates unchanged while assessing how higher energy prices affect inflation expectations. Markets are watching forward guidance, as a more hawkish BoC could support the Canadian Dollar and the Fed’s message could steer the US Dollar.
Near-term movement may also be affected by developments linked to US-Iran tensions. The two policy announcements are expected to lift volatility in USD/CAD.
On the daily chart, USD/CAD stayed below the 100-day and 50-day SMAs at 1.3730–1.3733, with the 200-day SMA near 1.3818/1.3820. RSI was in the low-40s and MACD was negative.
Support was seen near 1.3600, then 1.3500. Resistance levels were 1.3730, 1.3733, and 1.3820.
Looking Back And Positioning Ahead
Looking back to 2025, we saw the USD/CAD pair pressured by a cautious Bank of Canada and the influence of oil prices. Now, in late April 2026, a similar dynamic is unfolding, presenting opportunities for traders who watch central bank policy closely. The market has shifted its focus from whether rates will be held to the specific timing of future rate cuts.
With Canadian inflation proving persistent at 2.9% as of the last report, the Bank of Canada is unlikely to signal an imminent rate cut from its current 4.25% policy rate. The US Federal Reserve faces a similar challenge with inflation at 3.4%, keeping its own policy rate higher at 4.75% and pushing back market expectations for cuts. This divergence creates a tense environment where any new data point can trigger volatility in the currency pair.
The Canadian dollar is receiving significant support from robust crude oil prices, with WTI currently trading firmly above $85 a barrel. Historically, such as during the commodity boom of 2022, sustained high energy prices have provided a strong tailwind for the loonie. Derivative traders should consider that if oil prices remain elevated, this will continue to act as a powerful anchor against Canadian dollar weakness.
Given the uncertainty surrounding the timing of rate cuts, implied volatility in USD/CAD options is likely to rise ahead of upcoming central bank meetings in May and June. Traders who anticipate that high oil prices and a cautious BoC will push the pair lower could consider buying put options to capitalize on a downward move while defining their risk. This strategy allows for profiting from a stronger Canadian dollar without the exposure of shorting the pair directly.
