The Canadian Dollar (CAD) remains stable against the US Dollar (USD) as it continues to trade within a cluster of key technical levels. Scotiabank’s strategists, Shaun Osborne and Eric Theoret, note the flat trading pattern while focusing on market participants’ expectations about the Bank of Canada’s policy. <\/p>\n
The near-term outlook seems reliant on the speech by Senior Deputy Governor Rogers. Yield spreads and the options market maintain a neutral stance, with risk reversals remaining flat. Scotiabank’s fair value estimate for USD\/CAD is 1.3744, indicating the CAD is undervalued. <\/p>\n
The USD\/CAD pair has been consolidating, hovering near the 61.8% retracement level of a prior rally at 1.3944. Resistance is noted at the 200-day moving average of 1.3978, just under the 1.40 psychological level. Weakness below 1.3900 might target the 50-day moving average at 1.3835, with a projected trading range between 1.3920 and 1.3980.<\/p>\n
As of October 9, 2025, we are seeing the Canadian dollar trade sideways against the US dollar, stuck in a very tight range. This suggests the market is waiting for a clear signal before making a big move. For now, traders should expect this consolidation to continue between the 1.3920 and 1.3980 levels.<\/p>\n
This holding pattern makes sense when we look at the central banks. The Bank of Canada is giving us mixed signals, especially after September’s inflation data came in at 2.8%, still stubbornly above the 2% target. All eyes are now on Senior Deputy Governor Rogers’ speech for any hints about whether the rate hikes from 2024 are truly over for good.<\/p>\n
Meanwhile, the US economy is also showing signs of slowing down, with the latest jobs report from last week indicating hiring is beginning to cool. This has kept the Federal Reserve in a wait-and-see mode, preventing US yields from running higher and keeping the USD\/CAD pair locked in place. The options market reflects this uncertainty, with very little premium being paid for bets on large price swings in the coming weeks.<\/p>\n
Given that our models suggest a fair value for the USD\/CAD exchange rate is closer to 1.3744, the Canadian dollar appears significantly undervalued at current levels. This points to a potential downside risk for the currency pair. Derivative traders could consider strategies that profit from low volatility, such as selling out-of-the-money call options above the 1.4000 resistance level.<\/p>\n
We must remember the sharp rally in USD\/CAD that occurred between September 2024 and February 2025, which created the current technical levels we are now watching. The current quiet period is a stark contrast and suggests the market is digesting those earlier moves. Any break below the 1.3900 support level could signal that a move back towards fair value has begun.<\/p>\n
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