The Canadian Dollar (CAD) shows little change in quiet trading, with weak Asian and soft European markets suggesting a cautious risk sentiment. US equity futures displayed some gains, while a rebound in US yields and widened short-term US/Canada spreads contribute to the CAD’s softer tone.

Scotiabank estimates the fair value (FV) for CAD at 1.3890, a shift from the low 1.38s earlier in the week. Technically, USD appears bullish with recent chart patterns suggesting rising potential. A bull ‘hammer’ candle pattern is emerging on the weekly chart, complemented by a ‘morning star’ candle reversal on the daily chart. Intraday analysis indicates that USD breaking through the 1.4020/25 area may reach new short-term highs above 1.41.

Support Levels And FXStreet Insights

Support levels are identified at 1.3975 and 1.3890/00. This follows an inverse Head & Shoulders pattern aiming for a 1.4025 point, as previously noted. The FXStreet Insights Team curates market observations from experts, incorporating insights from both internal and external analysts.

The Canadian dollar looks soft, and we see this trend continuing into November. The main driver is the widening gap between US and Canadian interest rates, with the US 2-year yield now sitting over 50 basis points above its Canadian equivalent as of this week. This spread, confirmed by the latest central bank statements, makes holding US dollars more attractive than the loonie.

Recent data from earlier in October 2025 supports this bearish view on the CAD. The latest US jobs report showed resilient hiring, while Canada’s own employment figures unexpectedly softened, feeding speculation that the Bank of Canada may need to consider easing policy sooner than the Fed. Adding to this pressure, WTI crude oil prices have struggled to hold above $80 a barrel, weighing on the commodity-linked currency.

Trading Strategies And Market Dynamics

For those trading derivatives, buying call options on USD/CAD seems like a direct way to position for further Canadian dollar weakness. The technical analysis points to a potential move towards the 1.41 level if the pair can decisively break the 1.4025 resistance zone. This provides a clear target for strikes expiring in the next several weeks.

Another approach would be to establish long positions in USD/CAD futures contracts. We are watching the 1.3975 level as a key area of intraday support, which could serve as a solid entry point for new positions. The underlying momentum strongly suggests that dips in the exchange rate will likely be bought.

This market dynamic is very similar to what we observed back in late 2023. During that time, the US Federal Reserve’s aggressive policy stance also outpaced the Bank of Canada, leading to a sustained rally in USD/CAD toward the 1.39 handle. That historical precedent shows how powerful these interest rate divergences can be.

The technical charts are reinforcing this fundamental outlook across multiple timeframes. A bullish ‘hammer’ candle is forming on the weekly chart, while the daily chart shows a solid reversal pattern from earlier this week. These signals suggest the recent strength in the US dollar has strong technical backing and is not just a temporary move.

Create your live VT Markets account and start trading now.