FX.co ★ Blackpink | USD/CAD

USD/CAD Holds Firm Above Key Support as Fed Outlook and Risk Sentiment Shape the Next Move The USD/CAD pair begins the week on a softer footing, hovering near the 1.3975 region as traders continue to assess the implications of the surprise peace agreement between the United States and Iran. While the Canadian Dollar has found some support from improving global sentiment, the broader trend still favors the US Dollar, which remains backed by relatively resilient economic conditions and expectations that the Federal Reserve will maintain a restrictive policy stance for longer. The result is a market that appears reluctant to abandon the bullish USD/CAD narrative, even as risk appetite improves across financial markets. Much of the recent shift in sentiment has been driven by geopolitical developments. President Donald Trump’s announcement of a deal to end the conflict with Iran was followed by confirmation from Iranian authorities that the US naval blockade would be lifted and hostilities would cease across multiple fronts. Markets immediately interpreted the news as a positive step toward greater stability in the Middle East. With the Strait of Hormuz expected to reopen, concerns over energy supply disruptions have eased considerably. That has helped reduce some of the inflation fears that dominated trading activity in recent months and encouraged investors to rotate back into risk-sensitive assets. Even so, the reaction in currency markets has been more measured than dramatic. One reason is that traders quickly shifted their focus toward monetary policy. The Federal Reserve's interest rate decision later this week remains the most important event on the calendar. Although policymakers are widely expected to leave rates unchanged, investors will pay close attention to the tone of the statement and any guidance regarding future policy moves. Markets still see a meaningful possibility that the Fed could tighten policy again before year-end, and that expectation continues to provide a layer of support for the US Dollar despite the improvement in global risk sentiment. From a technical standpoint, the daily chart continues to lean in favor of buyers. What stands out is the market's ability to remain comfortably above major trend indicators despite several attempts to pull lower. Price action remains positioned above the 100-day Simple Moving Average and above the middle Bollinger Band, both of which continue to reinforce the broader bullish structure. While momentum has slowed somewhat in recent sessions, sellers have so far failed to generate the kind of sustained pressure needed to challenge the dominant uptrend. That resilience suggests underlying demand remains intact. At the same time, there are early signs that bullish momentum may be becoming stretched. The Relative Strength Index remains above the 70 threshold, a level that often signals overbought conditions. Importantly, overbought readings do not automatically trigger reversals, but they do increase the likelihood of consolidation or a corrective pullback before the next directional move develops. This is particularly relevant given that USD/CAD is now approaching an important resistance area. The 1.4025 zone represents the upper Bollinger Band and has the potential to act as a short-term ceiling. A decisive break above that level would strengthen the bullish case and expose the October high near 1.4060, followed by the psychologically significant 1.4100 handle. On the downside, traders will closely monitor the 1.3931 area, which marks an important near-term support level. A break below that zone could trigger a deeper retracement toward the middle Bollinger Band around 1.3865. Even then, the broader structure would remain constructive unless price falls back toward the 100-day SMA near 1.3732. For now, the path of least resistance still appears tilted to the upside, though perhaps at a slower pace than earlier in the rally. With geopolitical risks easing and the Federal Reserve decision approaching, USD/CAD may be entering a period where fundamentals and technicals are equally important. The pair remains bullish overall, but traders should be prepared for increased volatility as markets receive fresh guidance from policymakers later this week.