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USD/CAD Drops to Two-Week Lows After Canada Posts Robust Q3 Growth
Traders' Opinions
Summary:
The Canadian Dollar strengthened as Canada’s Q3 GDP rebounded sharply, while expectations of a Fed rate cut kept the USD under broad pressure, pushing USD/CAD lower for the fourth straight day.
Sell
PENDINGUSDCAD
EXP
1.39600
Entry Price
1.38000
TP
1.40600
SL
1.39748 -0.00534 -0.38%
--
Point
PENDING
1.38000
TP
CLOSING
1.39600
Entry Price
1.40600
SL
The Canadian Dollar advanced firmly on Friday, extending its week-long momentum against the US Dollar as investors responded to a stronger-than-expected rebound in Canada’s third-quarter economic performance. The move pushed USD/CAD to around 1.3984, its fourth consecutive daily decline, as sustained weakness in the Greenback and fresh optimism surrounding the Canadian macro outlook drove traders out of the pair.
The latest GDP figures from Statistics Canada provided a meaningful lift to sentiment. September GDP expanded 0.2% month-on-month, matching expectations while validating a modest but steady recovery after August’s figure was revised upward to -0.1% from the previously reported -0.3%. More importantly, the economy posted 0.6% real GDP growth in Q3, reversing the previous quarter’s -0.5% contraction and sharply outperforming economist forecasts. On an annualized basis, growth surged 2.6%, far above the 0.5% consensus, and a powerful rebound from the -1.8% pace recorded in Q2.
A closer look into the components of the report reveals an economy stabilizing unevenly. The rebound was overwhelmingly driven by the external sector. Exports rose 0.2%, while imports fell 2.2%, providing a strong net trade contribution that effectively masked underlying softness in domestic demand. Household consumption weakened—the clearest indication that higher interest rates and rising living costs continue to squeeze purchasing power. Vehicle sales dropped 2.3%, while government spending slipped 0.4%, underscoring broad caution in both private and public sector activity.
Despite the upbeat headline GDP reading, analysts broadly agree that the numbers are unlikely to shift expectations for the Bank of Canada’s December 10 policy meeting. In October, the central bank cut its policy rate to 2.25%, signaling that it may be nearing the end of its easing cycle. Policymakers described the current stance as “about right,” suggesting that—barring unexpected inflationary developments—further cuts are unlikely in the near term. The GDP data reinforces this stance: not strong enough to prompt tightening, but sufficiently improved to justify a wait-and-see approach.
Meanwhile, developments south of the border are creating a widening policy divergence that is working in the Canadian Dollar’s favor. Market pricing increasingly reflects expectations that the Federal Reserve will move ahead with a 25 bps rate cut in December, following a series of dovish-leaning remarks from influential Fed officials earlier in the week. According to the CME FedWatch Tool, traders now assign an 85% probability of a reduction at the December 9–10 meeting. With US yields slipping and the Greenback losing momentum across the board, USD/CAD faces persistent downward pressure.
From a broader market perspective, the combination of a steady BoC and a potentially accommodative Fed tilts the balance of risks to the downside for USD/CAD in the near term. While Canada’s domestic economy remains fragile, the relative policy path is increasingly CAD-supportive, especially as the US Dollar struggles to regain its footing.
Technical Analysis 
USD/CAD continues to trade under pronounced bearish pressure, reflecting a clear corrective descent in the short term. The pair remains pinned below the EMA50, reinforcing negative sentiment and signaling that buyers are struggling to regain control after the recent oversold conditions.
Momentum indicators suggest that bearish dominance is intact, and the recent break of a key ascending trendline has strengthened the downside bias. With sentiment growing increasingly aligned against the US Dollar, technical structure now points to a continuation of the decline.
All eyes are now on the 1.3800 support zone, a psychologically significant level and the next logical bearish target. A clean break below this region could expose deeper downside levels, potentially accelerating the pair’s corrective cycle into December—especially if Fed expectations continue shifting in a dovish direction.
TRADE RECOMMENDATION
SELL USDCAD
ENTRY PRICE: 1.3960
STOP LOSS: 1.4060
TAKE PRROFIT: 1.3800
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