The Canadian Dollar (CAD) is bouncing back against the US Dollar (USD) after recently falling to a 30-week low. However, trade talks between Canada and the US are still on hold, which creates uncertainty in the currency market. Prime Minister Mark Carney stated that there have been no new trade discussions since the US President paused them. The future of the Canadian Dollar may rely on whether the Bank of Canada and the Federal Reserve continue or stop cutting interest rates.

The Bank of Canada’s Strategic Influence

The Bank of Canada affects the CAD by setting interest rates to keep inflation between 1-3%. Recently, inflation in Canada rose to 2.4%, which may influence future rate decisions. The strength of Canada’s economy and outside factors, like oil prices (its biggest export), also play a role in the currency’s value. Key economic indicators, such as GDP, employment rates, and trade balance, help determine the value of the Canadian Dollar. Strong economic data usually supports the currency, while weak data may weaken it. Currently, the USD/CAD rate shows an upward trend, although there may be short-term pullbacks. Technical indicators reveal that buying pressure is decreasing, suggesting a possible pause in a broader upward trend. As of November 11, 2025, the Canadian dollar is making a slight comeback after a 30-week low against the USD. With the USD/CAD rate nearing 1.4000, we should monitor if this level can hold as support. The longer trend still favors a stronger US dollar, so this momentary bounce might not indicate a complete turnaround.

The US Federal Reserve and Market Expectations

The Bank of Canada’s stance is crucial, especially since inflation recently surpassed their target at 2.4%. Additionally, Canada’s job report for October 2025 showed unexpected strength with 45,000 new jobs added, leaving little reason for the central bank to cut rates. This strength could lead traders to consider selling out-of-the-money call options on USD/CAD, expecting the pair to struggle to rise above recent highs of 1.4140 in the weeks ahead. Meanwhile, the Federal Reserve is feeling the pressure to ease policy, with markets expecting a rate cut by January 2026. Recent US retail sales data from October showed a decrease of 0.5%, raising concerns of a consumer slowdown and strengthening the case for a Fed rate cut. This expectation is a challenge for the US dollar and supports the current rise of the Canadian dollar. We should also pay attention to oil prices, as West Texas Intermediate (WTI) crude fell below $82 a barrel this week, raising concerns about declining global demand. Although this price previously supported Canada’s economy, any further drop could limit the recovery of the Canadian dollar. Traders who are long on CAD may want to hedge their positions against a potential drop in oil prices. Given the stalled trade discussions between Canada and the US, a major rally in the Canadian dollar seems unlikely for now. This uncertainty suggests that the USD/CAD pair could range between 1.3900 and 1.4150. Such a market may be favorable for options strategies that benefit from low volatility, like selling straddles or strangles. We remember the central bank divergence in 2022 and 2023, which created strong currency trends for months. While the current situation is less intense, the differing approaches of the Bank of Canada and the Fed will largely determine this currency pair’s direction in the coming year. For now, the short-term momentum favors the Canadian dollar, but the long-term bullish trend for USD/CAD remains unchanged. Create your live VT Markets account and start trading now.

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