Fed & BoC Rate Decisions Set to Drive USD/CAD Volatility This Week

USD/CAD faces heightened volatility as markets await crucial rate decisions from both the Federal Reserve and Bank of Canada this week. The pair currently trades near 1.3850, consolidating after recent dollar strength pushed it from 1.3700 lows. Market consensus expects the Fed to maintain rates at 5.25-5.50%, though dovish signals could emerge as inflation moderates toward the 2% target. The BoC decision carries more uncertainty, with analysts split between a hold and a potential 25bp cut amid cooling Canadian economic data. USD/JPY remains in focus near 150.00 as intervention risks persist, while the Dollar Index hovers around 104.50. Technical indicators suggest USD/CAD resistance at 1.3900 and support at 1.3800. Diverging monetary policies between the two central banks could establish a new directional trend, with a hawkish Fed and dovish BoC potentially driving the pair toward 1.4000.