USD/CAD Price Forecast: Strives to break above 1.3800 on BoC dovish bets

USD/CAD aims to break above 1.3800 as investors expect the BoC to cut interest rates by 50 bps on Wednesday.
The Canadian economy needs more stimulus to uplift overall demand and job growth.
The US Dollar struggles to extend its upside as investors look for fresh cues about the Fed’s interest rate outlook.

Sagar Dua FXStreet

The USD/CAD pair gathers strength to break above the immediate resistance of 1.3800 in Friday’s North American session. The Loonie pair remains firm as the Canadian Dollar (CAD) weakens on expectations that the Bank of Canada (BoC) could announce a super-size interest rate cut of 50 basis points (bps) in its monetary policy meeting on Wednesday.

Sliding price pressures and a sharp weakness in labor growth and household spending have prompted expectations of BoC larger-than-usual rate cuts. The BoC has already reduced its key borrowing rates by 75 basis points (bps) to 4.25% this year. This would be the fourth consecutive interest rate cut by the BoC in a row. Canada’s Consumer Price Index (CPI) slid to 1.6% in September, lower than the bank’s target of 2%.

Meanwhile, an eight-day winning streak in the US Dollar (USD) appears to have paused as investors look for fresh cues about the Federal Reserve’s (Fed) likely interest rate action in the remainder of the year. Currently, financial market participants expect the Fed to cut interest rates further by 25 bps in both November and December.

USD/CAD witnessed strong buying interest after a Double Bottom formation near 1.3440 on a daily timeframe. The bullish reversal formation got the green signal after a breakout above the September 19 high around 1.3650.

The near-term outlook of the Loonie pair has strengthened further as the 20- and 50-day Exponential Moving Averages (EMAs) deliver a bull cross near 1.3600.

The 14-day Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, pointing to an active momentum.

More upside towards April 16 high of 1.3846 and Year-To-Date (YTD) high of 1.3945 would appear if the pair decisively breaks above the round-level resistance of 1.3800.

In an alternate scenario, a downside move below the September 19 high around 1.3650 will expose the asset to May 16 low near 1.3600, followed by September 13 high of 1.3538.

USD/CAD daily chart

(The story was corrected at 14:42 GMT on Friday to say in the first bullet that USD/CAD aims to break above 1.3800 as investors expect the BoC to cut interest rates by 50 bps on Wednesday, not the Fed)

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

AUD/USD seems vulnerable near 0.6800, 10-month low amid bullish USD

AUD/USD languishes near a 10-month low during the Asian session on Friday, awaiting a break below 0.6800 before the next leg up amid a bullish US Dollar. Firming Fed rate-hike expectations, along with fading hopes for US-Iran diplomacy, help the USD hold gains at its highest level since April 2025. Moreover, the RBA’s dovish tilt undermines the Aussie and backs the case for further losses.

USD/JPY bulls turn cautious near 160.00 amid intervention risks

USD/JPY enters a bullish consolidation phase around its highest level since early September as bulls turn cautious amid intervention risk near 160.00. Meanwhile, the downside seems cushioned as the wide US-Japan interest rate gap keeps the Yen carry trade active. Furthermore, the possibility of a jumbo Fed rate hike and Middle East uncertainties hold the US Dollar near a 19-month top, supporting the currency pair.

Gold remains on the back foot below $3,900

Gold now alternates gains with losses below the $3,900 mark per troy ounce on Friday. The precious metal struggles to regain traction amid the firmer US Dollar, mixed US Treasury yields and expectations of further tightening by the Fed at its December meeting.

Bitcoin just posted five straight losing weeks, and the storm may not be over yet

Bitcoin is struggling to find support, slipping below $70,000 as multiple headwinds threaten to push the Crypto King lower. The much-anticipated “Uptober” rally failed to materialize, with persistent selling pressure and widespread liquidations instead reinforcing the “Rektober” narrative.

Week ahead – Fed Minutes, inflation data and Nvidia earnings to guide investors

Fed minutes may add to hawkish tone as bets of 50-bps hike grow. Nvidia to report earnings as bar to impress high after spy scandal. Trade and geopolitics to be focal point of Trump-Xi summit.

Gold hit its lowest level of 2026 near $3,850

Gold (XAU/USD) attempts to stabilize around $3,890 on Friday after falling to $3,852 on Thursday, its lowest level since October 2025. The precious metal has lost more than 4% this week, as investors increasingly anticipate further monetary tightening from the Federal Reserve (Fed). The latest decline reflects a sharp change in market expectations.