The USD/CAD pair rallied in the early part of Thursday’s session, although a slight pullback followed. Even so, traders should remain attentive, as the 1.40 level continues to act as a major support zone, strengthened further by the 50-day EMA. Given the current market setup, USD/CAD is expected to find renewed buying interest here, with the 1.4250 region remaining the primary upside target and a well-defined supply zone.
The interest rate differential continues to favor the US dollar, supporting upward momentum in USD/CAD. With no major US jobs data scheduled before the upcoming FOMC decision, expectations of delayed rate cuts in the United States have contributed to sustained USD strength. This dynamic is clearly reflected in USD/CAD, which has been responding positively to monetary policy expectations.
Questions still linger over the trade relationship between the United States and Canada. While meaningful progress has been limited, most major trade flows are already covered under existing agreements. As a result, current discussions primarily revolve around secondary or peripheral issues. Given the size disparity between the two economies, Canada’s economic outlook remains closely linked to that of the US, reinforcing fundamental drivers behind USD/CAD.
Despite signs of a mild economic slowdown in the US, the dollar continues to appreciate—an outcome that aligns with defensive positioning and carry-based flows. Traders holding USD/CAD benefit from daily compensation due to the rate differential, which has encouraged a buy-the-dip strategy. Consequently, short-term pullbacks in USD/CAD continue to present attractive accumulation opportunities rather than signal broader trend reversals.