USDCAD stops declining ahead of central bank monetary decisions

A stronger Canadian dollar has recently pushed the USDCAD currency pair down. The surge in CAD, in turn, was driven by rising oil prices. Despite a correction at the beginning of the week, the crude cost remains elevated after the US introduced another package of restrictions against Russian fuel companies. This is typically favorable for the commodity-related loonie.

However, this trend is short-lived. Recent data show that the support derived from American sanctions is limited due to global oversupply. Furthermore, OPEC+ is now preparing for another output increase in December, and the alliance is not the only one considering this option. This weighs on oil prices. Thus, the rally may soon come to an end, leaving the Canadian dollar without one of its key growth drivers.

Earlier, the decline in USDCAD was also underpinned by a monetary policy divergence. While the Bank of Canada (BoC) is almost done cutting rates, the Federal Reserve (Fed) is just starting to reduce its borrowing costs, making investors reconsider their positions. The narrowing interest rate spread between the two economies exerts fundamental pressure on the USDCAD pair.

The technical picture confirms a weakening downward momentum within a broader descending trend. The price is currently holding above the key support level at 1.39220, which coincides with October’s consolidation area, preventing a steeper decline. The Stochastic Oscillator has just exited oversold territory, generating a bullish impulse. Meanwhile, the Chaikin indicator, despite remaining in the negative zone, points to increased buyer activity and a potential rise. 

Given the aforementioned factors, USDCAD may rebound following the central banks’ monetary decisions, which would provide traders with a good opportunity to sell the pair.

Consider the following trading strategy:

Sell USDCAD during its rebound to 1.40050. Take profit: 1.38900. Stop loss: 1.40200.

This forecast remains relevant between October 29 and November 5, 2025.