Last week, the Bank of Canada lowered its key benchmark interest rate by 50 basis points to 3.75%, marking the first significant decline in over four years, and praised signs that the country has returned to a low inflation era.

Bank of Canada Governor McLam stated on Tuesday that the Bank of Canada has begun to see the impact of the four interest rate cuts so far this year and expects to gather more evidence in the coming months.

McClelland stated that future interest rate cuts will be based on upcoming economic data. Although the population growth rate is expected to slow down, per capita consumption is expected to show an accelerating trend.

McClelland also stated that if Canada's economic progress matches expectations, it is expected to continue lowering interest rates in order to stimulate demand and ensure inflation remains within the target range.

Due to the expectation that the Bank of Canada will maintain a aggressive policy easing stance at its upcoming December meeting, the Canadian dollar remains fragile.

The next decision of the Bank of Canada will be held on December 5th. Economists predict that due to downward risks to Canada's economic growth, the Bank of Canada will cut interest rates by another 50 basis points in December.

According to foreign exchange market analyst Patricio Martin, technically speaking, the bullish trend of the US dollar against the Canadian dollar still exists, with RSI and MACD flashing overbought signals.

The current Relative Strength Index (RSI) is 74, indicating that the currency pair is in an overbought area. RSI also shows a moderate upward trend, indicating that buying pressure is rising.

The convergence divergence of moving averages (MACD) also shows a bullish outlook, with the bar chart showing an upward trend. This indicates that purchasing pressure is forming and the overall outlook for the currency pair remains optimistic. However, the overbought nature of these signals has opened the door for correction. Before the next bullish trend, the US dollar should find support between the 1.3800 and 1.3900 levels against the Canadian dollar.

Dutch International's foreign exchange strategist Francesco Pesole said that if the US dollar breaks through the August high of 1.3920 against the Canadian dollar, it may pave the way for a rise to 1.40.

Daily chart of USD/CAD exchange rate