The Canadian Dollar has fallen after President Trump declared trade talks with Canada over. Scotiabank’s strategists noted this came after an Ontario advertisement criticized US tariffs, but the market’s response has largely stayed within recent USD/CAD levels. In August, Retail Sales bounced back by 1%, meeting expectations. However, early September data suggests a decline, revealing slow growth. This might lead the Bank of Canada to think about a 25bps rate cut in their next policy meeting.

Market Trends And Analysis

The recent rise in the USD indicates possible support, but it hasn’t confirmed a clear upward trend in the charts. Seasonal factors could weigh on the CAD, with resistance points for USD/CAD at 1.4035 and 1.4080. In other market news, the Dow Jones reached a record high due to softer inflation reports. Gold prices have increased as the chance of a Fed rate cut rises, while AUD/USD remains steady despite mixed data from the US. In cryptocurrencies, Bitcoin, Ethereum, and XRP are gaining traction with sustained retail interest. JPMorgan plans to offer Bitcoin and Ethereum-backed loans for institutions by year-end. Forex traders are looking for strategic insights as the market evolves. With President Trump ceasing trade talks, the Canadian dollar is softening, edging the USD/CAD exchange rate closer to 1.3980. However, the limited market reaction indicates traders view this as political maneuvering rather than a complete breakdown in relations. This perspective echoes the hardline tactics seen during the CUSMA negotiations in 2018, which ultimately resulted in a deal.

Bank Of Canada And Market Reactions

All eyes are on the Bank of Canada’s policy meeting next week, especially after preliminary data showed a drop in consumer spending for September. Current overnight index swaps reflect an 85% chance of a 25 basis point interest rate cut, which could further impact the CAD. The slow growth outlook and trade uncertainties give the central bank a clear reason to act. For derivatives traders, this scenario presents a unique opportunity, with market fear low and the VIX stable around 16. One-month implied volatility for USD/CAD has risen to 7.8%, while six-month forward volatility remains stable at 6.5%. This suggests the market expects the current tensions to be short-lived. Traders might want to exploit short-term volatility while anticipating the currency pair to maintain a broader range. Immediate resistance for USD/CAD is at 1.4035, then at 1.4080, levels that could be reached if the USD continues to gain. We should also consider that the Canadian dollar typically faces strong seasonal challenges this time of year. Over the last 15 years, the CAD has depreciated against the USD in November and December nearly 70% of the time. These trends occur even as softer US inflation data has pushed the Dow Jones to new highs and increased expectations for a Federal Reserve rate cut. The US Dollar Index (DXY) remains strong above 107, but anticipated easing by the Fed might limit its upward momentum. Additionally, the ongoing government shutdown in the US adds uncertainty, making long-term trades more complex. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now