USD/CAD has found potential primary support at a four-month low of 1.3721. The 14-day RSI remains at 33, below its midline, indicating limited upside momentum.
Currently testing the upper boundary of a descending wedge near 1.3790, USD/CAD trades around 1.3780 in Europe. The daily chart suggests a bullish potential, but the pair remains under a bearish bias due to being below both nine-day and 50-day EMAs.
Technical Indicators
Moving averages slope downwards, with price action capped by the nine-day EMA, indicating a persistent downtrend. Support levels lie at 1.3721, 1.3710, and the psychological 1.3700, with potential further pressure targeting 1.3539.
Resistance at the descending wedge boundary around 1.3790, the nine-day EMA at 1.3811, and the 50-day EMA at 1.3928 could spur a recovery. A rise could target the three-week high of 1.4014.
The Canadian Dollar shows weakness against major currencies, particularly the US Dollar. The technical analysis was aided by an AI tool, and investment decisions should be based on thorough research. Markets and instruments are presented for informational purposes only, noting inherent risk and uncertainty.
We are seeing the USD/CAD pair test a critical resistance level near 1.3790, which forms the upper boundary of a descending wedge pattern. While this pattern is typically bullish, key momentum indicators like the moving averages still signal a downtrend. This creates a tense standoff, and derivative traders should watch for a decisive break in either direction.
Investment Strategies
For those anticipating a bullish breakout, a sustained move above the 1.3811 level would be the trigger to consider buying call options expiring in late January or early February 2026. A confirmed break here would validate the wedge pattern, opening the door for a move toward the 50-day average at 1.3928. This outlook is strengthened by fundamental factors diverging between the US and Canada.
For instance, last week’s US employment report for November 2025 showed the addition of 195,000 jobs, beating expectations and keeping the Federal Reserve on a cautious path. In contrast, the Bank of Canada is facing a cooler economy, with retail sales figures from October 2025 showing a decline for the second straight month. This policy divergence naturally favors a stronger US dollar.
On the other hand, if the pair fails to break above the 1.3800 resistance, the prevailing bearish trend could easily resume. Traders expecting this outcome might look to buy put options if the price falls below the key support at 1.3721. A breach of this level would signal that sellers are still in control, with an initial target at the psychological 1.3700 mark.
We must also consider the price of WTI crude oil, which has recently slipped to nearly $74 a barrel amid forecasts of a mild winter and slowing global growth. This is a pattern we saw back in late 2023, where falling oil prices put significant pressure on the Canadian dollar. Continued weakness in the energy market could provide a headwind for the loonie and support the USD/CAD pair, even if the technical breakout fails to materialize immediately.
