The strengthening of the Canadian dollar driven by rising oil prices has led to a subdued USDCAD exchange rate. Notably, Canada is the U.S.' largest crude oil export partner. West Texas Intermediate (WTI) crude oil prices have remained around US$61 per barrel. The increase in crude oil prices is attributed to OPEC+ signaling a pause in production hikes. On Sunday, OPEC+ announced that after a slight increase in output next month, plans are set to suspend further production increases into the first quarter of 2026. Last Wednesday, the Bank of Canada reduced its policy interest rate to 2.25%, indicating that the easing cycle may be nearing completion. The central bank announced a 25 basis point reduction in the overnight rate target to 2.25%, with the bank rate set at 2.5% and the deposit rate at 2.20%. In its policy statement, the Bank noted that, given the increasingly transparent impact of U.S. trade actions on economic growth and inflation, the monetary policy report has resumed its forecasts for the global and Canadian economies. Due to the persistent high uncertainty surrounding U.S. trade policies, these projections now face broader risk ranges than before. The Canadian economy is undergoing a structural transition. Long-term damages from trade conflicts have diminished potential output capacity and increased production costs, thereby constraining the monetary policy space to stimulate demand and maintain low inflation. The Bank of Canada emphasized its commitment to ensuring public confidence in price stability during global economic fluctuations. The next scheduled announcement of the overnight rate target is December 10, 2025, with the upcoming monetary policy report due for release on January 28, 2026.

The Federal Reserve has implemented its second rate cut of the year, lowering the target range for the federal funds rate to 3.75%–4.0%. This has diminished market expectations for a December rate cut, providing support to the U.S. dollar. Consequently, the USDCAD currency pair may recover recent losses and continue its upward trajectory for the third consecutive trading session. Federal Reserve Chairman Jerome Powell stated at the post-meeting press conference that a December rate cut remains highly uncertain. Powell also cautioned that policymakers might need to adopt a wait-and-see approach until official economic data is released. According to the FedWatch tool by the Chicago Mercantile Exchange, traders currently estimate a 69% probability of a rate decrease in December, down from 93% a week earlier. However, due to the prolonged government shutdown, traders are likely to remain cautious, potentially heightening fears about the U.S. economy. The government impasse has entered its sixth week, with Congress deadlocked over an appropriations bill backed by Republicans, and no straightforward resolution currently in sight.

In the 1D timeframe, the Bollinger Bands are contracting, indicating narrowing volatility. The short-term EMA12 has stabilized, and the price has regained support above the EMA12 and the middle Bollinger Band, signaling a shift back to bullish momentum. A golden cross in the MACD would further accelerate the upward trend. The RSI stands at 58, reflecting strong bullish sentiment. Resistance levels are near the upper Bollinger Band and previous highs around 1.407 and 1.44. In the 1W timeframe, the Bollinger Bands are expanding upward, with MACD exhibiting sustained bullish momentum. Price action oscillates near the upper Bollinger Band, and following a MACD golden cross, the MACD line and signal line have moved above the zero-axis. The RSI is at 57, with higher lows, indicating improving market confidence in continued upward movement. Therefore, it is recommended to go long at the lows.

Trading Direction: Buy

Entry Price: 1.4017

Target Price: 1.44

Stop Loss: 1.38

Support: 1.378, 1.37, 1.357

Resistance: 1.41, 1.42, 1.44