Money is weird right now. If you've been watching the loonie lately, you know it's been a bit of a rollercoaster. One day we're talking about a "collapse" and the next, analysts are shouting from the rooftops that the Canadian dollar is about to go on a tear. Honestly, trying to pin down currency predictions canadian dollar experts agree on is like trying to catch smoke with your bare hands.
But as we sit here in January 2026, the fog is finally starting to lift.
The Canadian dollar—affectionately or frustratingly known as the loonie—is currently hovering around that $0.72 USD mark. It’s been stuck in a "tug-of-war" between some pretty massive global forces. On one side, you’ve got the chaos in the U.S. with the Federal Reserve’s independence being questioned. On the other, we have the Bank of Canada (BoC) basically saying, "We're done cutting rates for now."
What the Big Banks Are Actually Saying
You've probably seen the headlines. Scotiabank, BMO, and TD have all been tweaking their spreadsheets. It's not all doom and gloom. In fact, most of the big players are actually getting bullish.
Take Scotiabank, for example. Their FX strategist Shaun Osborne recently adjusted their end-of-2026 forecast for USD/CAD to 1.33. For those of us who think in "cents," that’s roughly 75 cents US. That is a pretty significant jump from where we are today. Why the optimism?
It basically comes down to interest rates.
For most of 2025, the Bank of Canada was slashing rates like a suburban dad at a Black Friday sale. They brought the benchmark rate down to 2.25%. But now? They’ve hit the pause button. Meanwhile, the U.S. Federal Reserve is expected to keep cutting through the first half of 2026. When Canada stops cutting and the U.S. keeps going, that "rate gap" closes.
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Investors like higher rates. When the gap narrows, the loonie starts looking a lot more attractive to the big money.
The Trump Factor and the USMCA Headache
We can’t talk about the Canadian dollar without talking about the elephant in the room: U.S. trade policy.
2026 is the big year for the USMCA (that's the "new NAFTA") joint review. This is the single biggest "known unknown" on the calendar. President Trump has been making a lot of noise about tariffs, and that kind of talk makes currency traders very, very nervous.
- Tariff Fears: If the U.S. slaps broad tariffs on Canadian goods, the loonie takes a hit.
- The Silver Lining: BMO Capital Markets noted that while the U.S. average tariff is around 17% for the rest of the world, Canada is currently sitting at about 6% to 7%.
- The "Carney" Defense: Prime Minister Mark Carney has been vocal about keeping Canadian energy competitive even as the U.S. considers bringing back Venezuelan crude.
It’s a messy political landscape. Jerome Powell, the Fed Chair, is even dealing with subpoenas and threats of criminal indictment from the Department of Justice. This kind of instability in the U.S. usually makes people run to "safe" currencies, but ironically, it has occasionally sent the US dollar down and the loonie up simply because people are worried about the Fed's independence.
Oil: The Old Friend That Keeps Disappointing
Back in the day, if oil went up, the loonie went up. Simple, right?
Well, it’s not that simple anymore. While WTI oil prices have seen a bit of a bounce lately—around $61 per barrel—it hasn’t given the Canadian dollar the "rocket fuel" boost it used to. Goldman Sachs is actually predicting an "excess oil supply" for the rest of 2026.
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However, there is a new player in town: LNG.
Canada’s LNG exports are expected to surge by 50% between now and 2030. Shell’s LNG Canada project is a massive part of this. We are slowly shifting from being just an "oil currency" to being a broader "energy currency." If natural gas stays profitable (around $4.00 to $4.50 per MCF), that provides a much sturdier floor for the Canadian dollar than volatile crude oil ever did.
Why the "Loonie Collapse" Narrative is Likely Wrong
You'll see some bears calling for $0.60 USD. Honestly? It’s hard to see that happening unless the trade deal completely falls apart.
The Canadian economy has been surprisingly resilient. Sure, the unemployment rate is creeping toward 7%, but consumer spending is holding up. We’ve avoided a recession so far. The BoC’s Tiff Macklem has been clear: the "neutral rate" is likely where we are now. If inflation stays near that 2% target, the next move for rates in late 2026 might actually be up.
CIBC’s Sarah Ying is even looking for a rate hike by the end of the year if GDP keeps surprising to the upside.
Technical Levels to Watch
If you’re a numbers person, keep these levels on your radar.
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Right now, USD/CAD is hitting some "pivotal resistance" around 1.3850 to 1.3900. If it can’t break through that, the loonie has room to run toward 1.35 or even 1.31 (which is Macquarie’s end-of-year target). On the flip side, if we see a "breakout" above 1.40, then yeah, we might be looking at those $0.70 cent lows again.
But most technical analysts, including Michael Boutros at FOREX.com, are watching for a "collapse" in the USD/CAD pair, which would be great news for anyone heading to Florida this winter.
Practical Steps for Your Wallet
So, what do you actually do with this information?
- Don't panic-buy USD. If the 12-month forecasts from the big banks (1.33 to 1.35) are even close to right, the loonie is going to be stronger a year from now than it is today.
- Hedge your bets if you're a business. If you export to the U.S., a stronger loonie actually hurts your bottom line. Look into forward contracts now while the USD is still relatively expensive.
- Watch the Jan 28 BoC Meeting. While a "hold" is 88% priced in, the language the Bank uses will tell us everything. If they sound worried about inflation, the loonie will jump.
- Energy Stocks are Still Key. Even if the currency doesn't move 1-to-1 with oil anymore, the health of the TSX (and by extension the CAD) is still heavily tied to the energy sector.
Predicting currencies is a fool's errand, but the data suggests the Canadian dollar is currently undervalued. Between the Fed's drama and Canada's steady hand on interest rates, the "loonie" might just be the dark horse of 2026.
Keep a close eye on the USMCA news cycle. That is going to be the volatility driver for the rest of the year. If we get a "fair" deal by the summer, expect the Canadian dollar to shake off its current weakness and head back toward the mid-70s.