USD/CAD faces downside pressure as BoC holds rates steady

USD/CAD declined 0.5% to 1.3620 after the Bank of Canada maintained interest rates at 4.75%, signaling confidence in the Canadian economy despite global uncertainties. The decision, coupled with rising trade tensions over potential US aluminum and steel tariffs, has strengthened the loonie against the greenback. Oil prices gained 1.2% to $78.50/barrel, providing additional support for the commodity-linked CAD. Technical analysis shows USD/CAD breaking below 1.3650 support, opening the path toward 1.3580 and potentially 1.3550. Resistance now sits at 1.3650-1.3670. The BoC's steady stance contrasts with market expectations for potential Fed rate cuts, creating a favorable rate differential for CAD. Trade policy risks remain a wildcard, as any escalation in US-Canada trade disputes could reverse current CAD strength. Near-term direction depends on Friday's Canadian employment data.