USD/CAD Holds Gains Near 1.3700 Ahead of Fed Meeting, Limited Downside to 1.3650

USD/CAD Holds Gains Near 1.3700 Ahead of Fed Meeting, Limited Downside to 1.3650

The USD/CAD pair remains resilient on Wednesday, holding onto most of Tuesday’s gains around the 1.3700 level ahead of the highly anticipated Federal Reserve monetary policy announcement later today. While the pair saw some modest retracement with support near 1.3650, overall bullish momentum stays intact as traders cautiously adjust positions.

Risk aversion escalated sharply after US President Donald Trump demanded Iran’s unconditional surrender, issued warnings about increased US involvement in the Israel-Iran conflict, and threatened Iran’s Supreme Leader Ali Khamenei. This geopolitical tension drove the US Dollar higher on Tuesday, pushing USD/CAD up by approximately 0.8%.

Meanwhile, crude oil prices continue to surge amid Middle East unrest, with WTI crude hitting levels unseen since late January. As Canada is a major oil exporter, higher crude prices typically lend support to the Canadian Dollar, limiting USD/CAD’s upside.

Investors now closely watch the Fed for signals on a possible rate cut in September, with the monetary policy meeting expected to heavily influence the pair’s near-term trajectory.

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