The USD/CAD is steady around 1.3950 as traders await Canada’s employment report. The Canadian unemployment rate is expected to rise to 7%, with no new jobs added, compared to 66.6K jobs created in October. During Friday’s Asian session, the Loonie is trading within a narrow range, anticipating the labor market report at 13:30 GMT. Traders are looking for hints about the Bank of Canada’s (BoC) monetary policy, especially as unemployment is expected to rise. The employment data could influence the BoC’s decision on interest rate cuts at its upcoming meeting on Wednesday. If the job market shows weakness, it may lead to lower rates. Meanwhile, the US Dollar remains careful, as the Federal Reserve is also expected to cut rates, with an 87% chance of a 25 basis points reduction. In Canada, factors like interest rates, oil prices, and economic indicators greatly affect the CAD. Oil is Canada’s main export, so higher oil prices usually strengthen the CAD due to better trade balances. Inflation trends can also lead to expected rate changes, positively influencing the CAD. The economy’s strength, reflected in GDP, employment rates, and consumer surveys, impacts the CAD’s direction. Strong economic data attracts foreign investment, which might prompt the BoC to raise rates, boosting the CAD. Conversely, weak data can weaken the CAD. With USD/CAD sitting near 1.3950, we are focusing on today’s Canadian employment report for November. A rise in the unemployment rate to 7.0% would likely signal a BoC interest rate cut next Wednesday. If the jobs data is weak, consider short-term options that could gain if USD/CAD moves above 1.4000. There is an 87% chance that the US Federal Reserve will cut interest rates next week, creating a scenario where both central banks are easing. The key question becomes which one is more aggressive in its cuts. Therefore, our strategies should focus on the *relative* shifts between the policies rather than just betting on one currency’s direction. Recent economic data from autumn 2025 aligns with this dovish outlook for both banks. Canada’s GDP growth for the third quarter slowed to only 0.6%, while the US added just 95,000 jobs last month, significantly below the 2025 average. These numbers support both the BoC and the Fed in starting an easing cycle. Another challenge for the Canadian dollar is the declining oil price, which has fallen below $70 per barrel from over $85 in September 2025. This adds to the CAD’s weakness, reinforcing strategies that favor USD/CAD, as the loonie faces pressure regardless of central bank policies. With major central bank decisions on the horizon, we expect increased volatility for the USD/CAD pair. Strategies like buying a strangle using options could be beneficial, as they can profit from significant price changes in either direction after the announcements. The market anticipates movement, so our strategies should account for a sharp price swing once clearer policy directions are revealed. Looking back at earlier periods of coordinated easing, such as in 2020, can provide insights on currency behavior. In that period, the emphasis was on guidance regarding the duration and depth of the easing cycle, rather than the initial cuts. Thus, our trading decisions for next week should heavily consider the statements from both the BoC and the Fed, as their outlook for 2026 will likely influence the trend of the pair.

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