Title: USD/CAD Forecast: Dollar Steadies as Oil Softens and Trade Concerns Cloud Outlook
Author credit: Original insights adapted and expanded from Yohay Elam – ForexCrunch.com
As of late October 2025, the USD/CAD exchange rate continues to exhibit resilience, bolstered by a broadly stronger U.S. dollar and a combination of weakening global oil prices and lingering trade concerns. The currency pair has shown firm footing, currently trading around the 1.38 level, staying elevated due to several macroeconomic and geopolitical factors.
This article explores the broader trends behind the move, examines technical and fundamental drivers, and outlines what traders should watch in the coming weeks.
Macroeconomic Backdrop Supporting the U.S. Dollar (USD)
The U.S. dollar has posted steady gains in recent weeks, buoyed by the following macroeconomic catalysts:
– Solid U.S. economic data: GDP growth for Q3 surprised to the upside at an annualized rate of 3.1%, exceeding economists’ expectations. Consumer spending remains strong, and non-farm payrolls have consistently shown robust growth, signaling healthy labor market conditions.
– Sticky inflation: Core PCE — the Federal Reserve’s preferred measure of inflation — has remained marginally above the 2% target, keeping monetary policy expectations relatively hawkish.
– Fed guidance: While the Federal Reserve kept interest rates unchanged at the most recent meeting, Chair Jerome Powell emphasized a data-dependent approach and left the door open for another rate hike if inflation proves stubborn. This underpins expectations of higher U.S. yields for longer, supporting the greenback.
– Risk-off sentiment: The rise in geopolitical tensions globally — including ongoing conflicts in Eastern Europe and the Middle East — has renewed demand for safe-haven assets like the U.S. dollar.
Oil Prices and Their Influence on the Canadian Dollar (CAD)
Canada’s economy is tightly linked to commodity exports, especially crude oil, as energy accounts for a sizeable portion of the country’s GDP and export revenues. At the heart of the recent weakness in the loonie lies the continued decline in global oil prices.
– Brent and WTI crude have both suffered losses in recent weeks. As of this writing, WTI is trading around $71 per barrel, down from over $83 just a month prior.
– Rising global supply: Increased output from U.S. shale producers and higher production quotas in OPEC+ countries have flooded the market.
– Slower Chinese demand: Despite recent stimulus measures from Beijing, Chinese economic activity remains uneven, limiting growth in crude imports.
– Soft global economic forecasts: Global institutions, including the IMF and World Bank, have downgraded their forecasts for global GDP in 2025 amid monetary tightening and friction in international trade.
Weak oil prices have historically been a bearish signal for the CAD, and the current macroeconomic context reinforces that trend.
Trade Tensions Add to CAD Pressure
Beyond oil, trade dynamics are also weighing heavily on the Canadian dollar. Several tensions and uncertainties present downside risks to the Canadian economy:
– U.S.-Canada trade relations: Disputes over dairy exports, digital services, and environmental regulations under the United States-Mexico-Canada Agreement (USMCA) have deteriorated trust. These disagreements threaten tariffs or legal actions, which could impact cross-border economic activity.
– Export sector challenges: Canada’s export economy is sensitive to any disruptions in global supply chains. Lingering effects from earlier supply bottlenecks, combined with slower global trade volumes, have affected business investment and manufacturing output.
– Interest rate divergence: The Bank of Canada has taken a comparatively cautious tone in recent meetings. With inflation appearing to trend downward domestically, the central bank is viewed as less hawkish than its U.S. counterpart, contributing to capital outflows and loonie weakness.
Technical Analysis: USD/CAD
From a charting perspective, the USD/CAD pair has breached key resistance levels in recent sessions, indicating bullish momentum remains intact. Here’s
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