The US Dollar is experiencing losses against the Canadian Dollar, currently testing the support level at 1.3975. Hopes for a US-China trade deal and expected Federal Reserve rate cuts have increased risk-taking, which is impacting the USD/CAD exchange rate. Positive developments from US and Chinese discussions in Malaysia enhance optimism for a trade agreement. This stability has kept Oil prices above $61.00, which benefits the Canadian Dollar. From a technical perspective, the USD/CAD is under pressure as sellers are testing the bottom of a three-week range at 1.3975. Indicators like the 4-Hour RSI and Moving Average Convergence Divergence suggest the possibility of further declines. If it drops below 1.3975, the focus will shift to the 38.2% Fibonacci level at 1.3943 and the 1.3335 mark. On the upside, any upward movement will encounter resistance at 1.4035, the highs from October, and potentially reach up to 1.4115. Today, the USD showed mixed results against major currencies but performed best against the Swiss Franc. The heat map below shows the percentage changes of various currency pairings, with the left column as the base currency and the top row as the quote currency. Notably, the USD dropped 0.41% against the CAD today. Reflecting back on late 2019, market attention was on a potential US-China trade deal and a more accommodating Federal Reserve. On October 27, 2025, things have changed dramatically, rendering the support level of 1.3975 an old memory. Now, ongoing inflation issues and high energy costs drive the market, rather than trade disputes. Currently, the USD/CAD pair is trading closer to 1.3550, much lower than in 2019. Oil prices, which are crucial for the Canadian dollar, remain strong, with WTI crude staying above $85 per barrel this quarter. This contrasts sharply with the $61 oil price that was seen as a peak two weeks back in 2019. In this new context, derivative traders should shift their focus from bets based on trade news to strategies focused on volatility and differences in central bank policies. The Federal Reserve has paused with the federal funds rate at 4.75%, while the Bank of Canada is under pressure from a slowing housing market. This difference suggests that options strategies, like straddles or strangles, may be useful for trading potential breakouts around future inflation data releases. Instead of looking for a drop below 1.3975, there is now significant options interest around the 1.3400 and 1.3650 strikes for December expirations. This shows that the market is anticipating range-bound activity unless unexpected events happen in the energy sector or from central bank announcements. Therefore, using strategies like iron condors to sell premium could be wiser than positioning for a drastic move, as was forecasted in 2019.

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