The USD/CAD pair continued its upward trajectory during Thursday's Asian trading session, climbing to approximately 1.4000 and marking its highest level in about five weeks, with the pair currently exchanging hands near 1.3992. This advance is being propelled by a broad-based rally in the US dollar and a temporary pause in the crude oil price surge.

The US Dollar Index remains steady near 100.33, hovering within this week's elevated range, indicating that markets have swiftly increased their allocation to dollar-denominated assets following the Federal Reserve's policy shift. On Wednesday, the Fed raised its benchmark interest rate by 25 basis points to a range of 3.75%–4.00%, aligning with market expectations. This move marks a resumption of rate hikes after five consecutive meetings where rates were held steady, prompting investors to reassess the future trajectory of monetary policy.

Chair Kevin Warsh emphasized in his post-meeting remarks that price pressures could persist for a longer duration. Although he did not provide a more specific timeline for future rate adjustments, his hawkish stance on inflation has already fueled expectations for additional tightening. Market data reveals that the probability of at least two more rate hikes by year-end has risen to 88.7%, up from approximately 79% prior to the announcement. This shift in rate expectations towards a more hawkish direction has driven short-end US yields higher while reinforcing the dollar's interest rate advantage.

This week, the greenback has posted gains against most major currencies, including a rise of about 1.61% against the Japanese yen, 1.22% against the euro, 1.17% against the British pound, and 0.88% against the Canadian dollar. The broad-based strength of the US dollar serves as a key catalyst for USD/CAD's push beyond the 1.39 level towards the 1.40 threshold.

On the Canadian dollar front, shifts in the crude oil market are eroding its traditional commodity-currency support. International oil prices had previously broken above the $100 mark, but the upward momentum has weakened as markets reassess the recovery of Middle East supply and Saudi Arabia's energy export capabilities. For Canada, a major net energy exporter, sustained high crude prices typically improve export revenue forecasts and provide a tailwind for the loonie. Conversely, a retreat from elevated price levels would correspondingly diminish the commodity price support that the Canadian dollar receives.

Nevertheless, oil prices remain relatively high at current levels, suggesting that the USD/CAD ascent reflects a combination of dollar strength and reduced support for the loonie, rather than being driven by a single factor. Should crude oil reclaim and sustain levels above $100, the Canadian dollar may regain some footing. Alternatively, if oil continues to decline while US yields remain elevated, USD/CAD could maintain its firm bias. From a macroeconomic perspective, the US-Canada interest rate differential remains a crucial determinant of exchange rate movements. The Fed's renewed tightening widens the US rate advantage, and the Bank of Canada's subsequent policy stance will be a key focus for markets in the coming phase.

Furthermore, crude oil prices, Canadian economic data, and global risk sentiment will all influence the loonie through capital flows. Investors should closely monitor US inflation and employment figures, Federal Reserve officials' speeches, Bank of Canada policy signals, and changes in oil prices. On the daily chart, USD/CAD is trading near 1.3992, positioned above the 20-period EMA at 1.3890, with the overall short-term trend pointing upwards. After breaking above 1.39, the pair has approached the 1.4000 psychological level, with the RSI reading around 61.2, indicating notable bullish momentum without reaching extreme overbought conditions.

To the upside, the first target is the 23.6% Fibonacci retracement level at 1.4082, followed by the previous cycle high near 1.4247. A decisive breakout above 1.4082 could open the door for further gains. On the downside, initial support is seen at the 38.2% retracement level near 1.3980, followed by the 50% retracement at 1.3898 and the 20-period EMA at 1.3890. On the 4-hour timeframe, USD/CAD maintains a bullish consolidation structure, with short-term moving averages trending higher and prices converging on the 1.4000 mark. A sustained break and hold above 1.4000 could lead to a test of resistance near 1.4080. Should bulls fail to overcome 1.4000 and profit-taking ensues, the 1.3898–1.3900 zone becomes the initial support. A further decline below 1.3890 would undermine the 4-hour bullish structure, potentially driving the pair towards the next support level around 1.3816.

In conclusion, the USD/CAD pair's climb towards 1.4000 is primarily attributed to a stronger US dollar driven by hawkish Fed policy expectations, coupled with diminished support for the loonie as crude oil's upward momentum stalls. In the near term, the 1.4000 level stands as a significant psychological barrier, and the market's directional choice following a potential breakout will be closely watched. Going forward, US rate expectations, Canadian monetary policy, and crude oil prices will remain the main drivers of the exchange rate's trajectory. If dollar strength persists alongside continued oil price corrections, upward pressure on USD/CAD may extend, while a resurgence in oil prices could alleviate downward pressure on the Canadian dollar.