• USD/CAD attracts some dip-buyers during the Asian session, though it lacks bullish conviction.
• Geopolitical risks and a fresh leg up in US bond yields revive USD demand, supporting the pair.
• Recovering oil prices underpin the Loonie, though the divergent BoC-Fed stance caps the upside.

The USD/CAD pair edges higher during the Asian session on Wednesday, stalling the previous day’s retracement slide from the vicinity of its highest level since April 2025, touched at the start of this week. Spot prices, however, lack bullish conviction and currently trade just above the 1.4200 mark, up only 0.05% for the day, amid mixed cues.

The US Dollar (USD) attracts some dip-buyers following Tuesday’s profit-taking slide and turns out to be a key factor offering some support to the USD/CAD pair. Meanwhile, crude oil prices look to build on the overnight bounce from a one-month low amid concerns over supply disruptions in the Middle East, underpinning the commodity-linked Loonie and capping the upside for the currency pair.

The Saudi-backed Yemeni government claimed control over strategic points along the Red Sea coast, including areas around the Bab al-Mandeb Strait. The Iran-backed Houthi group retaliated by attacking key targets in Saudi Arabia, including an Aramco refinery in Riyadh. Moreover, Iran has ramped up its pace of attacks in the Strait of Hormuz over the past week, keeping the geopolitical risk premium in play.

Adding to this, a fresh leg up in US bond yields helps revive demand for the safe-haven Greenback, which, along with the divergent Bank of Canada (BoC) and the US Federal Reserve (Fed) monetary policy stance, favors USD/CAD bulls. In fact, the BoC has less reason to raise interest rates than the US central bank, as Canada’s weaker economic outlook could contain broader inflationary pressures.

Meanwhile, traders are currently pricing in around an 85% chance that the Fed will raise borrowing costs by the end of this year, though USD bulls might opt to wait for fresh cues about the future policy path. Hence, the focus will be on the release of FOMC meeting Minutes, due later today, which will play a key role in influencing the USD price dynamics and provide some impetus to the USD/CAD pair.

USD/CAD daily chart

Technical Analysis

The overnight fall might still be categorized as a corrective pullback amid the overbought daily Relative Strength Index (RSI), which hints at strong upside momentum rather than an immediate reversal. Moreover, the USD/CAD pair is trading above all visible Fibonacci retracement levels, validating the near-term positive outlook.

Meanwhile, initial support is seen at the 23.6% Fibo. retracement at 1.4163, with deeper pullbacks likely to find buying interest at the 38.2% level at 1.4086 and the 50% retracement at 1.4024. On the topside, the primary hurdle is the structural anchor at 1.4288, a break of which would open the way to fresh highs in the current bullish cycle.