The Canadian Dollar (CAD) is stablearound the 1.40 mark, showing no recent movement. Right now, it seems to be overvalued, sitting more than one standard deviation above the fair value estimate of 1.3854, but it hasn’t dropped below 1.40. Price indicators are mixed. On the weekly chart, there’s a bearish pattern after a drop from 1.4140. Meanwhile, the daily chart shows a bullish reversal from last Thursday, bouncing off the 40-day moving average at 1.3991. Short-term trend signals are unclear; the daily DMI oscillator supports the USD but with weaker signals.

Intraday Oscillator Analysis

The intraday oscillator is showing no clear movement. This suggests that range trading will continue in the near future. We could see movement if the USD breaks through 1.4080 (possibly challenging 1.4140/50) or drops below 1.3980/90, which might lead to a decline towards 1.3900/50. The Canadian dollar is locked in a tight range against the US dollar at the 1.40 level. There hasn’t been any significant news to shift this range, leading to a confusing outlook for short-term direction. The CAD remains overvalued compared to our fair value estimate of 1.3854, indicating a possible downward correction. This stagnation reflects the current positions of both the Bank of Canada and the US Federal Reserve, which we expect to maintain until their policy meetings in December 2025. Recent data show that Canadian inflation for October was 2.8%, slightly below expectations, easing pressure on the Bank of Canada to make changes. This is quite different from the volatility seen during the aggressive rate hikes in 2023.

Stable Crude Oil Prices

With WTI crude oil prices steady in the low $80s, a major factor affecting the CAD is neutral at the moment. Given the mixed technical signals and lack of a clear driving force, selling volatility might be a good strategy in the upcoming weeks. Options strategies like short straddles or iron condors centered around the 1.40 strike could be effective in profiting from this consolidation. However, we must be ready for a breakout as we inch closer to the central bank meetings in December. Important levels to monitor are 1.4080 on the upside and 1.3980 on the downside. A strong break of these levels could lead to a significant trend shift, making long strangles a possible strategy for those looking to capitalize on increased volatility. Since the pair is trading above its estimated fair value, a break below the 1.3980 support seems likely in the medium term. This could indicate a drop towards the 1.3900 level. Traders may want to buy out-of-the-money puts or take bearish positions if the 1.40 mark continues to hold. Create your live VT Markets account and start trading now.

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