Insights 
VT 
The Canadian Dollar (CAD) experiences a minor decline against the US Dollar (USD) but remains relatively stable compared to the weekend. Scotiabank’s Chief FX Strategists, Shaun Osborne and Eric Theoret, note that the recent stronger-than-expected GDP report supported CAD previously, though details showed weak consumer spending and business investment.
The data suggests steady policy from the Bank of Canada and indicates a narrowing of short-term US/Canada yield spreads. Despite the CAD’s current undervaluation relative to an estimated equilibrium of 1.3901, it has yet to fully rebound. The CAD had a strong close last week but need further improvement in its technical position against the USD.
Currency Level Dynamics
The currency dipped below the 1.3972 level but did not sustain the break. This level acts as a potential double top trigger, possibly pushing it lower to the low 1.38s with a clear break. Resistance is identified at 1.4025.
We are seeing the Canadian dollar hold its ground following last week’s surprisingly strong GDP numbers. This report solidifies the view that the Bank of Canada will keep interest rates steady for now. This contrasts with the situation in the United States, which helps narrow the yield spread and supports the loonie.
However, the foundation of that GDP strength is shaky, as it was driven by government and housing activity rather than consumer or business spending. In fact, Canadian retail sales data for October 2025, released two weeks ago, showed a 0.2% decline, confirming that the consumer is cautious. This underlying weakness suggests the Canadian dollar’s recent strength may not last.
External factors are also creating headwinds, as WTI crude oil prices fell 4% in the last week of November 2025 to settle at $78.50 per barrel amid global demand concerns. The market is now looking ahead to this Friday’s critical US Non-Farm Payrolls report. A strong US jobs number could quickly reverse the Canadian dollar’s recent gains.
Impact on Derivatives Trading
For derivatives traders, the key level to watch is 1.3972 in the USD/CAD pair. A sustained break below this point would signal further Canadian dollar strength, making put options on USD/CAD with a strike around 1.3900 an attractive strategy. This would align with a potential move towards what we see as the currency’s equilibrium value.
Conversely, if support at 1.3972 holds, especially following a strong US jobs report, we could see a rebound toward resistance at 1.4025. In this scenario, buying call options on USD/CAD would be the appropriate response to play for a weaker loonie. The conflicting data suggests a volatility play, such as a straddle, could also be effective to capture a sharp move in either direction.
This environment is very different from what we saw back in 2023 and 2024, when central bank policy created clear, overarching trends. Now, with both the Bank of Canada and the US Federal Reserve on pause, we are in a market driven by individual data points. This makes these technical levels and short-term economic reports exceptionally important for positioning.
