Insights 
VT 
The USD/CAD pair remains steady at 1.4010 after recent gains as the Canadian Dollar strengthens on rising Oil prices. Canada, being the largest crude exporter to the US, benefits from West Texas Intermediate Oil prices holding around $61.00 per barrel.
OPEC+ plans to pause output increases in early 2026, following a modest rise next month, which influences Oil and CAD values. The USD may strengthen again due to reduced expectations for a December rate cut by the Federal Reserve, despite recent rate reductions to 3.75%-4.0%.
Fed’s Stance
Fed Chair Jerome Powell expressed caution about further cuts, seeing a 69% chance of a December cut down from 93% previously. The prolonged US government shutdown adds economic uncertainty, now in its sixth week amid Congressional deadlock.
Key factors impacting the Canadian Dollar include the Bank of Canada’s interest rates, Oil prices, economic health, inflation, and trade balance. Higher rates attract investments and bolster the CAD, while Oil price changes directly affect its value. Inflation impacts CAD by influencing interest rate adjustments, and strong economic data generally boosts the currency’s appeal.
Based on the current situation, we see the USD/CAD pair holding near the 1.4010 mark, a level that presents a significant tug-of-war. The Canadian dollar is finding support from strong oil prices, while the US dollar is buoyed by a Federal Reserve that is hesitant to promise more rate cuts. This creates a tense balance that derivative traders need to watch closely in the coming weeks.
The strength in the Canadian dollar is not just about oil prices holding firm around $61 a barrel after the recent OPEC+ announcement. We’ve also seen Statistics Canada report a solid gain of 45,000 jobs last month, beating forecasts and pushing the Canadian unemployment rate down to 5.4%. These strong domestic fundamentals provide an additional tailwind for the loonie, independent of commodity movements.
US Economic Picture
On the other side of the pair, the Federal Reserve’s recent actions are driving the narrative for the US dollar. After cutting rates for the second time in 2025 to a 3.75%-4.0% range, Chairman Powell’s cautious tone has significantly lowered expectations for a third cut in December. The probability of a December cut has fallen from 93% to just 69% in the last week alone.
However, the US economic picture is becoming less clear, which complicates the Fed’s “wait-and-see” approach. The US Non-Farm Payrolls report from last Friday showed the economy added only 150,000 jobs in October, missing expectations and fueling concerns that the ongoing six-week government shutdown is starting to bite. This conflicting data—a hawkish Fed versus weakening economic indicators—is a recipe for volatility.
Looking at the charts, the 1.4000 level for USD/CAD is historically significant, representing highs we haven’t sustained since the market turmoil of 2020. Traders should recognize this as a potential resistance point that could be difficult to break without a strong catalyst. The market is essentially deciding whether US economic worries will outweigh the Fed’s cautious stance.
Given these opposing forces, we can expect implied volatility in USD/CAD options to increase ahead of the December Fed meeting. Traders should consider strategies that can profit from sharp moves in either direction, as the stalemate between strong Canadian data and uncertain US policy is unlikely to resolve quietly. The key will be to watch for any change in tone from Fed officials or further signs of economic impact from the government impasse.
