USD/CAD Forecast: Falls Against Loonie – 20 January 2026

The USD/CAD pair looks like it is trying to sort out whether or not the upward momentum will return.

The US dollar fell against the Canadian dollar during the trading session on Monday, as we continue to see a lot of noisy behavior and consolidation. With that being said, I think you have a situation where market participants are looking to figure out where to go next. We had recently seen the US dollar skyrocket against the Canadian dollar, and now it seems like it is spending a little bit of time working off some of that froth.

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It was Martin Luther King Jr. Day in the United States, and that, of course, affected New York trading, but at the end of the day, the market is likely to continue to see all of the same dynamics pushing the Canadian dollar back and forth. The Bank of Canada is basically where it needs to be as far as interest rates are concerned, while the Federal Reserve has been stubbornly hawkish despite the fact they have cut a couple of times. If that is going to continue to be the case, I think every data point that we get that shows signs of strength in America probably pushes the dollar higher against the Canadian dollar.

Separating Noise from Reality

The trade situation between the United States and Canada affects roughly 10% of trade, and a lot of the online nonsense that you are reading isn't actually based in reality. If it were, the US dollar would probably be trading somewhere closer to 1.8 against the Canadian dollar. The reality is that most of what is being bickered about between the Americans and the Canadians is a very small part of their trade.

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Yes, things are contentious and maybe even broken, but at the end of the day, the United States is still the main driver of the Canadian economy, and therefore these currencies will tend to move very rangebound overall. At this point, I look at any pullback toward the 1.3750 level as a potential buy on the dip opportunity.

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