On Wednesday, the USD/CAD pair enters a phase of bullish consolidation, fluctuating just below the five-week high reached the day before. Traders are holding off on aggressive positions ahead of key central bank decisions. Both the Bank of Canada and the Federal Reserve are set to announce their monetary policy decisions during the North American session. However, fundamental factors appear to lean in favor of bullish sentiment, suggesting that the path of least resistance for prices is to the upside.

The Canadian central bank is expected to maintain a cautious stance amid uncertainty and leave the interest rate unchanged at 2.75% for the third consecutive time.

Meanwhile, U.S. President Donald Trump stated that he does not anticipate a trade agreement with Canada anytime soon. He has already imposed tariffs of 25% on certain Canadian goods, 50% on aluminum and steel imports, and 25% on all cars and trucks manufactured outside the U.S. In addition, Trump noted that U.S. importers from Canada will face a 35% tax if no agreement is reached by August 1. These developments significantly overshadow the recent rise in oil prices, which might have otherwise supported the Canadian dollar under more favorable policy conditions, given the loonie's correlation with commodities.

At the same time, the U.S. dollar has pulled back slightly from its highest levels since June 23, recorded on Tuesday, placing modest pressure on USD/CAD. However, a significant decline in the greenback seems unlikely in the near term due to growing expectations that the Fed will keep interest rates elevated for longer to counter inflation risks stemming from higher U.S. tariffs. The rate is expected to remain in the 4.25–4.50% range, despite political pressure.

Markets are closely watching the Fed's monetary policy statement and comments from Chair Jerome Powell following the meeting, which may provide clues about potential rate cuts.

These factors will play a crucial role in the short-term performance of the U.S. dollar and will heavily influence the movement of the USD/CAD pair.

From a technical perspective, a sustained move and close above the 1.3775 level would provide new momentum for USD/CAD to extend its upward trajectory. Furthermore, daily chart oscillators are gaining positive traction and remain well below overbought territory, reinforcing the short-term bullish outlook. The next target would be a breakout above the psychological level of 1.3800, paving the way toward the 1.3870 barrier and potentially the next round number at 1.3900.

On the other hand, the pair is likely to find support around the 1.3750 level, where it may attract buyers aiming for a rebound toward the 1.3720 level. This would help limit losses near the 1.3700 psychological level, which now acts as a strong support zone and a key pivot point. However, a decisive break below this level would push spot prices toward the intermediate support zone of 1.3655–1.3630, en route to the round level of 1.3600. Further selling could shift the trend in favor of the bears.