The Canadian Dollar (CAD) remained stable as markets awaited decisions from the Bank of Canada (BoC) and the Federal Reserve (Fed) on interest rates. The pair USD/CAD hovered near 1.4000, with markets seeking more information on the rate differential’s potential impact.

Trade tensions persisted as US President Donald Trump engaged in disputes with key trading partners. Recent tariff threats included China, while trade talks with Canada ceased following a political disagreement involving a televised commercial.

Resistance and Support Levels

USD/CAD encountered resistance near the 1.4050–1.4080 range while maintaining a short-term constructive position. The pair is above the 50-day EMA (1.3914) and 200-day EMA (1.3889), indicating stable conditions. A close above 1.4080 may lead to further gains, while a decrease below the 50-day EMA could prompt a deeper decline toward 1.3850 support.

The Canadian Dollar is influenced by BoC interest rates, oil prices, economic health, inflation, and trade balance. The BoC adjusts rates to maintain 1-3% inflation, with higher rates generally benefiting the CAD. Fluctuating oil prices, Canada’s largest export, directly impact the currency, with increases often boosting CAD value.

Macroeconomic data like GDP and employment indicators affect CAD direction. A robust economy attracts investment and encourages BoC rate increases, strengthening the Canadian Dollar.

With the Bank of Canada (BoC) and the Federal Reserve both set to announce interest rate decisions this week, we expect the USD/CAD to be volatile. The market is currently consolidating around the 1.3650 level as traders await clarity on the future of the rate differential between the two central banks. For now, holding tight and preparing for a potential breakout seems to be the consensus play.

Current Market Observations

We are watching this from a very different lens than back in 2020, when erratic trade policy announcements from the Trump administration pushed USD/CAD toward the 1.4000 mark. The current, more stable trade relationship under the USMCA has removed a significant layer of volatility from the equation. That period of uncertainty serves as a reminder of how quickly geopolitical factors can overwhelm technicals.

The pair has been trading in a tight range for weeks, finding resistance near 1.3720 and support around the 50-day moving average at 1.3580. The Relative Strength Index (RSI) is hovering near the 50-midpoint, indicating a lack of directional conviction in the market. A decisive break of this range following the central bank announcements will likely dictate the trend for the remainder of the year.

A key factor for the Canadian dollar, the price of oil, has provided moderate support but is struggling to push higher. West Texas Intermediate (WTI) crude is currently trading near $82 per barrel, a healthy level, but concerns over slowing global demand are capping further upside. This makes oil less of a tailwind for the loonie than it has been in previous quarters.

Recent domestic data paints a complicated picture for the Bank of Canada. While September’s inflation report showed CPI remains sticky at 2.9%, our most recent GDP figures for the third quarter of 2025 revealed a sluggish annualized growth of only 0.8%. This puts the BoC in a difficult position of balancing inflation control with fears of an economic slowdown.

Given the immense uncertainty, derivative traders should consider strategies that profit from a spike in volatility. Options strategies like a long straddle could be effective for playing a sharp move in either direction without having to predict the outcome of the central bank meetings. For those with a directional bias, waiting for a sustained close above 1.3720 or below 1.3580 before entering is the more prudent approach.

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