The U.S. dollar held steady against the Canadian dollar on Monday, trading just below the 1.3950 mark as investors remained cautious ahead of the Bank of Canada’s upcoming interest rate decision. With few fresh drivers in early trading, the currency pair reflected a wait-and-see approach from markets positioning around potential shifts in monetary policy.
USD/CAD hovered around 1.3945, showing little movement as traders priced in the likelihood that the Bank of Canada will keep rates unchanged at its next meeting. Still, with inflation showing signs of persistence and the economy proving more resilient than expected, some market participants remain on alert for a hawkish surprise.
The Canadian dollar has also been supported by firm crude oil prices, which remain a key factor for the resource-linked loonie. However, the impact has been muted by broader strength in the greenback and uncertainty over global demand, particularly from China.
On the U.S. side, the dollar remains broadly stable amid mixed economic signals and cautious commentary from Federal Reserve officials. While inflation appears to be moderating, Fed policymakers have pushed back on expectations of imminent rate cuts, reinforcing support for the greenback in recent sessions.
Technical indicators show USD/CAD consolidating near resistance, with traders eyeing the 1.3970–1.4000 zone as a potential breakout area if the BoC underwhelms. Conversely, dovish Fed commentary or stronger Canadian data could push the pair lower, with support seen near 1.3850.
As attention turns to this week’s rate decision and policy statement from the Bank of Canada, the loonie’s next move may depend more on forward guidance than on the actual outcome. For now, the pair remains range-bound, with both sides awaiting central bank cues for clearer direction.
