The USD/CAD pair rebounded to 1.3900 in North American trading on Wednesday, erasing losses from the previous session as the U.S. Dollar (USD) gained strength. The U.S. Dollar Index (DXY) reached a four-month high near 105.40, marking one of the Greenback’s most substantial daily gains in years. The USD surge follows Donald Trump’s victory in the U.S. presidential election, where he defeated Kamala Harris in crucial battleground states, securing a win that also brought Republican control of the Senate. Trump’s expected policies, including higher import tariffs and reduced corporate taxes, will likely boost domestic investment and employment, making the USD more attractive to investors.

Looking ahead, the Federal Reserve’s (Fed) upcoming policy decision on Thursday is in focus. Market participants anticipate a 25 basis point rate cut to a range of 4.50%-4.75%, following a larger 50 bps cut in September. This rate reduction would mark the second easing move of the year as the Fed navigates a challenging economic landscape. Fed Chair Jerome Powell’s post-announcement comments will be closely monitored for insights into inflation projections and the future rate path.

The Canadian Dollar (CAD) remains pressured against the USD but holds relatively strong against other currencies, despite expectations of further cuts from the Bank of Canada (BoC). In its October meeting, the BoC enacted a significant 50 bps cut, citing weak labor demand and a need to stimulate economic growth.

Trade Idea:

Consider buying USD/CAD on pullbacks to 1.3880, targeting 1.3950 with a stop loss below 1.3850. The pair may extend gains as USD strength aligns with Fed easing and Trump’s economic policies.