Dynamics of the USD/CAD Pair on 17 October 2025
The U.S. dollar has weakened against the Canadian dollar over the past two trading sessions, settling around 1.4040–1.4050 on Friday, 17 October 2025. The pair’s movement is anchored by a combination of domestic policy uncertainty in the United States, modest oil price swings, and a brief period of technical over‑bought conditions.
1. Monetary Policy Uncertainty
A key driver behind the dollar’s decline is the continuation of the U.S. government shutdown. Market participants have been waiting for the Federal Reserve to release new guidance on the trajectory of policy tightening. In the absence of fresh data, traders have adopted a risk‑off stance that has favored the Canadian dollar. The absence of key economic releases—a consequence of the shutdown—has further reduced demand for U.S. dollar‑denominated assets.
2. Oil Prices and Commodity Sentiment
Oil prices have moderated during the week, which has dampened the typical support for the U.S. dollar that accompanies higher commodity prices. While the oil market remains volatile, the recent cap on downside movement has limited the upside momentum that could have buoyed the dollar. The Canadian dollar, which is heavily linked to the price of Canadian oil, has therefore benefited from a stable commodity backdrop.
3. Technical Factors
Technical analysis of the USD/CAD daily chart points to a period of over‑bought territory. The 14‑day Relative Strength Index (RSI) hovered around 70, a level that often precedes a correction. Support for the pair lies near the 9‑day Exponential Moving Average (EMA) at 1.4019, while resistance is seen at the six‑month high of 1.4079. Early European trading sessions saw the pair drift lower to around 1.4050, suggesting that short‑term momentum may be pulling back from its recent gains.
4. Broader Market Context
Credit stress at U.S. regional banks, heightened trade frictions between the U.S. and China, and the ongoing government shutdown have collectively dampened market sentiment. The lack of clear directional cues from Wall Street futures has kept the pair largely range‑bound, with the U.S. dollar under pressure against major partners, including the euro, the pound, and the yen.
5. Fundamental Snapshot
- Close Price (16 Oct 2025): 1.4046
- 52‑Week High (02 Feb 2025): 1.4791
- 52‑Week Low (15 Jun 2025): 1.35406
The current level of 1.4046 sits roughly 4 % above the 52‑week low and 7 % below the 52‑week high, indicating that the pair is trading in the lower to middle part of its annual range. If the U.S. dollar continues to lack a clear policy signal, the Canadian dollar may hold its ground or even gain modest upside until a significant development—such as a change in Fed policy or a decisive statement from the Bank of Canada—provides a new direction.
In summary, the USD/CAD pair’s recent retreat reflects a confluence of political uncertainty, commodity price moderation, and technical over‑bought conditions. Traders watching the pair will likely focus on upcoming policy statements and any shift in oil markets to determine whether the Canadian dollar’s strength is sustained or whether the dollar can regain footing.
