USDCAD may correct amid escalating trade tensions

The USDCAD currency pair is currently trading near today’s opening price of 1.40334. Market dynamics are mainly driven by trade tensions between the United States and China, which are supporting the US dollar’s strength and putting the Canadian economy under pressure due to lower oil costs.

Crude prices fell to $61.50 per barrel after Washington and Beijing failed to reach an agreement. This significantly weakens the Canadian dollar, as the energy sector is crucial for the country's economy. The situation is further exacerbated by the International Energy Agency's prediction of a considerable fuel supply surplus in 2026.

While trade tensions between the US and China keep building up and the global economy is at risk of a slowdown, the greenback confirms its status as a safe-haven asset, thereby supporting demand and putting upward pressure on USDCAD, especially given the uncertainty over further trade negotiations.

Nevertheless, the US dollar’s upside potential is limited. According to Federal Reserve (Fed) Chair Jerome Powell, the regulator may continue cutting interest rates, which would curb the currency's appreciation. Investors expect a 25-basis-point rate reduction as early as the next meeting.

Technical analysis shows that the pair has been trading upward since September 17, 2025. The Chaikin Oscillator remains positive, which indicates an accumulation of positions, but its slowing growth near local highs signals a possible weakening of momentum. The Stochastic Oscillator (%K=64, %D=61) is in neutral territory and has nearly completed a bearish crossover, hinting at a potential correction. The price is trading above the 23.6% Fibonacci retracement level near 1.39960, supporting a bullish bias. However, if a correction occurs, the 38.2% level (1.3945) would serve as a target.

Keep the following trading strategy in mind:

Sell USDCAD at the current price. Set a Take profit order near 1.39450 (the 38.2% Fibonacci retracement) and a Stop loss order around 1.40790 to manage risks in case of a rebound.

This forecast remains relevant from October 15 to October 22, 2025.