USD/CAD stays steady as rising Oil prices support the Loonie while demand for USD remains low. The pair trades negatively for the second day, hovering around 1.4000, just below the highs from April. Crude Oil prices opened higher, bouncing back from a five-month low due to a relaxed US approach on China tariffs. This helps the Canadian economy and the Loonie, along with an unexpected addition of 60,400 jobs in Canada for September.

Weak USD Demand

The US Dollar is facing weak demand in a risk-seeking market, while expectations of more US interest rate cuts are adding pressure. Ongoing US government shutdowns make investors cautious, limiting movement in the USD/CAD pair. From a technical viewpoint, the 200-day SMA offers support around the 1.3980-1.3975 range, indicating buying opportunities. However, US and Canadian holidays lead to lower trading volume. Key influences on the Canadian Dollar include Oil prices, Bank of Canada (BoC) interest rates, trade balance, and overall economic health. Inflation and macroeconomic indicators like GDP and PMIs play a crucial role in the CAD’s performance. A strong Canadian economy promotes investment and may lead to higher interest rates from the BoC, enhancing currency strength, while weak data can weaken the CAD. Looking back, it’s notable how the USD/CAD pair struggled near the 1.4000 level during the trade-war uncertainties of the Trump administration. Today, on October 13, 2025, the situation is different, with the pair trading lower around 1.3550. However, the main drivers remain quite similar and deserve our attention.

Role of Oil Prices

Oil prices play a vital role for the Canadian dollar. While recovering from five-month lows was significant in the past, WTI crude oil prices today are stable around $85 per barrel. This provides much stronger support for the Loonie than in previous years. The ongoing strength in energy exports keeps the Canadian dollar sturdy against the US dollar. There’s a clear difference in central bank policies compared to the past. The Bank of Canada is maintaining its key interest rate at 4.75% to tackle persistent domestic inflation. Meanwhile, last week’s US CPI data was slightly lower than expected at 3.1%, leading to speculation that the Federal Reserve may have finished its cycle of rate hikes. This policy gap is putting downward pressure on the USD/CAD pair. Employment data also reveals distinct narratives of two different times. The surprising Canadian jobs report of over 60,000 back then contrasts with the more recent September 2025 report, which reflected a steady gain of 25,000 jobs, keeping the unemployment rate at a healthy 5.4%. This consistent stability strengthens confidence in the Canadian economy. For derivative traders, this environment points to the potential for gradual declines in USD/CAD in the coming weeks. Selling call options with a strike price around 1.3700 could be a smart strategy to earn premiums, as a major rally above that level seems unlikely given current fundamentals. This strategy leverages the view that the pair’s upside is limited. Alternatively, traders seeking a direct bearish position might consider buying put options to benefit from a fall in the pair’s value. With the next Bank of Canada meeting set for October 22, 2025, using a bear put spread can effectively manage risk. This approach allows us to profit from a possible drop toward the 1.3400 level while capping our maximum loss if the market moves against us. Create your live VT Markets account and start trading now.

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