The Canadian Dollar (CAD) stayed steady while markets waited for the Bank of Canada (BoC) and the Federal Reserve (Fed) to announce interest rate decisions. The USD/CAD pair was around 1.4000, as traders looked for clues about how rate differences might affect the market. Trade tensions continued as US President Donald Trump clashed with important trading partners. He recently threatened tariffs against China, and trade discussions with Canada halted due to a political disagreement over a televised ad.

Resistance and Support Levels

The USD/CAD pair faced resistance near the 1.4050–1.4080 range, while its short-term outlook remained positive. It traded above the 50-day EMA (1.3914) and the 200-day EMA (1.3889), showing stable market conditions. If the pair closes above 1.4080, it could see more gains; however, falling below the 50-day EMA might lead to a decline towards 1.3850 support. The Canadian Dollar is affected by several factors, including BoC interest rates, oil prices, economic health, inflation, and the trade balance. The BoC aims for inflation between 1-3%, with higher rates typically benefiting the CAD. Changes in oil prices, Canada’s top export, directly impact its value; rising prices usually strengthen the CAD. Macroeconomic indicators, like GDP and employment data, also influence the CAD. A strong economy tends to attract investment and can lead to BoC rate hikes, boosting the Canadian Dollar. With both the Bank of Canada and the Federal Reserve set to announce interest rate decisions this week, we anticipate volatility in the USD/CAD. The market is currently hovering around the 1.3650 level as traders wait for more clarity on the rate differential between the two banks. For now, many think it’s best to hold steady and prepare for potential moves.

Current Market Observations

We are viewing the market from a very different perspective compared to 2020, when unpredictable trade policy announcements from the Trump administration drove USD/CAD up to 1.4000. The more stable trade relationship under the USMCA has reduced much of the volatility. That earlier uncertainty highlights how quickly geopolitical factors can shift market trends. The USD/CAD pair has been trading within a narrow range for weeks, facing resistance near 1.3720 and support near the 50-day moving average at 1.3580. The Relative Strength Index (RSI) is around the 50-point mark, indicating a lack of clear direction in the market. A decisive breakout from this range after the central bank announcements will likely set the trend for the rest of the year. The price of oil, a key driver for the Canadian dollar, has provided some support but is having trouble rising higher. West Texas Intermediate (WTI) crude is currently trading around $82 per barrel, a decent level, but worries about slowing global demand are limiting gains. This makes oil less of an advantage for the loonie compared to previous quarters. Recent domestic data paints a mixed picture for the Bank of Canada. September’s inflation report showed consumer prices (CPI) are holding at 2.9%. However, the latest GDP figures for the third quarter of 2025 revealed sluggish annual growth of only 0.8%. This puts the BoC in a tough spot, as it tries to control inflation while being concerned about an economic slowdown. In light of the uncertainty, traders might want to consider strategies that benefit from increased volatility. Options strategies like a long straddle could work well for taking advantage of sharp moves in either direction without needing to predict the outcomes of the central bank meetings. For those with a directional outlook, it’s wise to wait for a clear break above 1.3720 or below 1.3580 before entering the market. Create your live VT Markets account and start trading now.

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