• USD/CAD may fall toward the lower boundary of the falling wedge around 1.3950.
• The 14-day Relative Strength Index hovers around 45, reflecting bearish momentum.
• The pair is testing the immediate resistance confluence at the 50- and nine-day EMAs of 1.4066 and 1.4067, respectively.

USD/CAD gains ground for the third consecutive day, trading around 1.4060 during European hours on Wednesday. The Bank of Canada (BoC) is expected to deliver a 25-basis-point interest rate hike later in the day.

The technical analysis of the daily chart shows that the pair price is remaining within the falling wedge pattern, indicating a potential bullish breakout as selling momentum weakens.

The USD/CAD pair is holding a bearish near-term bias as spot languishes just under a tight cluster of Exponential Moving Averages (EMAs), with the 50-day EMA near 1.4066 and the nine-day EMA around 1.4068 acting as immediate overhead caps.

The USD/CAD pair has slipped beneath these trend gauges after failing to sustain recent highs, while the 14-day Relative Strength Index (RSI) around 45 suggests an ongoing bearish momentum rather than outright oversold conditions.

On the downside, the USD/CAD pair may fall toward the lower boundary of the falling wedge around 1.3950. A break below the wedge could put downward pressure on the pair to navigate the region around the five-month low of 1.3732, recorded on May 21. Further support lies at 1.3481, the lowest since October 2024.

The USD/CAD pair is testing the immediate resistance confluence at the 50- and nine-day EMAs of 1.4066 and 1.4067, respectively, aligned with the upper boundary of the falling wedge. Further upside above this confluence would open the door for the pair to explore the region around nearly an 18-month high of 1.4299, recorded on October 14.

Fed seen on hold now but December hike still in play

Strategists at ABN Amro expect the Fed to stay sidelined at this week’s meeting, flagging “some risk of hawkish dissents” even as policymakers refrain from moving rates. They acknowledge that “inflation remains too hot,” but argue that “declining breadth and a cooler labour market give the Fed room to wait.” Reflecting that shift in tone, they note that markets have “sharply reduced the probability of an October hike, and December is no longer fully priced.” Nonetheless, ABN Amro still look for “one final 25bp hike in December, followed by an extended hold.”

BoC meeting seen as live event with scope for surprise

Analysts at MUFG/BTMU highlight that market pricing for today’s BoC decision currently implies “an 80% probability of a rate hike,” a level they argue “is not quite in done-deal territory and there is scope for a surprise.” They suggest that, while investors lean toward another move from the BoC, the outcome remains sufficiently uncertain to keep the meeting a live event for markets.