The USD/CAD pair regained some buying momentum during Monday's Asian trading session, stabilizing after pulling back from above the 1.4000 level on Friday. The pair had earlier touched 1.4001, marking its highest point since August 7, with the current market environment continuing to favor bullish momentum for the currency pair. Weakening crude oil prices, a widening interest rate gap between the United States and Canada, and trade-related concerns are collectively undermining the Canadian dollar.

The recent decline in oil prices stands as a key factor pressuring the loonie. U.S. WTI crude fell to around $93.60 on Monday, marking a fourth consecutive day of losses, driven primarily by rising expectations of restored Middle East energy supplies and progress in diplomatic efforts. Meanwhile, the resumption of Saudi energy shipments has eased earlier supply disruption worries. For Canada, which relies heavily on energy exports, lower crude prices typically erode external support for the Canadian dollar.

Market perceptions regarding Middle East energy supplies are currently shifting. Oil and LNG transit volumes through the Strait of Hormuz have climbed to a six-month high over the past two weeks, indicating improved regional energy flows. If supply recovery continues to advance, the geopolitical risk premium embedded in crude prices could compress further, continuing to reduce support for the Canadian dollar.

Additionally, the policy rate gap between the Federal Reserve and the Bank of Canada is widening. The Bank of Canada held its policy rate at 2.25% this month, while the Fed raised rates by 25 basis points last week to a range of 3.75% to 4.00%, further expanding the spread between the U.S. dollar and the Canadian dollar. Markets are now assessing the Fed's future policy path, with hawkish signals from Fed officials notably raising expectations for another rate hike in October. The interest rate advantage of the U.S. dollar is already having a visible impact on the USD/CAD pair. The Canadian dollar previously weakened to near 1.4001 per U.S. dollar, its lowest level since August 7, with market participants broadly viewing the widening rate differential as a major driver behind the pair's rise.

Beyond rate differentials, trade policy uncertainty between Canada and the United States continues to weigh on the Canadian dollar's risk premium. Recent tariff measures adopted by both Washington and Ottawa have kept bilateral trade tensions elevated. For the Canadian economy, the U.S. remains its most important trading partner, meaning shifts in the trade environment not only affect export expectations but may also influence the Bank of Canada's future policy decisions through growth and business investment outlooks.

Looking at the greenback itself, the U.S. dollar index remains firm near the 100.30 level. Hawkish Fed policy expectations, U.S. economic resilience, and safe-haven demand are jointly supporting the dollar. Should the dollar index maintain its position above the 99.70 to 99.85 range, the USD/CAD pair will likely continue to receive external support.

However, the pair is not without short-term correction risks. Crude prices have declined steadily, and if Middle East energy supplies recover further, oil could remain under pressure and continue to favor the USD/CAD upside. Conversely, if crude stabilizes near $93 and market attention shifts back to Canadian economic data or Bank of Canada policy changes, the阶段性 selling pressure on the Canadian dollar may ease. Additionally, with the pair approaching the psychological 1.4000 level, some bullish profit-taking could add to short-term volatility.

The current market logic centers on three key variables: first, whether WTI crude can continue testing the $90 level; second, whether the Fed-Bank of Canada rate gap widens further; and third, whether the dollar index maintains its position above the 100 mark. If all three factors continue to align in favor of the greenback, the USD/CAD pair is likely to maintain its firm structure in the near term.

On the daily chart, USD/CAD remains above the 100-day EMA at 1.3924 and the 38.2% Fibonacci retracement at 1.3932, indicating that the upward structure formed over the past two weeks remains intact. After reclaiming the 50% Fibonacci retracement at 1.3992, the bulls still hold short-term initiative. Immediate upside attention is focused on the 61.8% Fibonacci retracement at 1.4052; a valid breakout above this zone would expose further resistance at the 78.6% retracement near 1.4137, with the prior swing high at 1.4246 serving as an additional upside target. The 1.4000 round figure currently acts as both psychological resistance and a critical battleground for short-term positioning; if the pair can establish itself above this level, upside potential may expand further.

To the downside, initial support is at 1.3992. If that level is lost, attention shifts to the support band between 1.3932 and 1.3924. Given that this zone coincides with both the 38.2% retracement and the 100-day EMA, a decisive break below would signal that the short-term bullish structure is under threat. Further downside support lies at 1.3858, and if that is also breached, the pair could extend losses toward the 1.3738 area.

On the 4-hour timeframe, USD/CAD remains in a firm phase following consolidation at higher levels. As long as the pair stays above the 1.3930 vicinity, near-term pullbacks can still be viewed as corrections within the broader uptrend. A break above 1.4052 could pave the way for a test of 1.4137; conversely, repeated failures around 1.4000 followed by a drop below 1.3930 would likely amplify the scope of short-term corrective movement.

Summing up the outlook, the USD/CAD pair currently draws support from three converging forces: falling oil prices, the widening U.S.-Canada policy rate gap, and a generally firm dollar. The 1.4000 level serves as a critical short-term inflection point. As long as the 1.3930 to 1.3924 support band remains intact, the pair stays in a bullish structure; a breakout above 1.4052 would open higher territory. Conversely, if oil prices stabilize and rebound, or the U.S. rate advantage fades, pushing the pair below 1.3924, the prior uptrend could enter a more pronounced corrective phase.