USD/CAD is trading around 1.3870, testing the upper ascending channel boundary. The 14-day Relative Strength Index at 60.8 indicates bullish conditions, supporting the pair’s positive momentum.
The pair’s strength is sustained by trading above the nine-day and 50-day Exponential Moving Averages (EMAs). Holding above the 50-day EMA at 1.3845 maintains a topside bias, with a potential target of 1.4014 if it surpasses the ascending channel’s boundary.
Key Support and Resistance Levels
A drop below the nine-day EMA at 1.3788 could slow the advance, shifting the focus towards support levels. The lower ascending channel boundary at 1.3730 is a key support, with a break below potentially leading to a test of 1.3642.
The CAD outperformed the Australian Dollar, shown in its relative strength against major currencies. It recorded a 0.33% appreciation against the Australian Dollar, while it dropped 0.15% against the US Dollar.
These percentages outline CAD’s performance against other currencies: USD -0.01%, EUR 0.07%, GBP -0.14%, JPY 0.15%, AUD 0.33%, NZD 0.31%, CHF -0.02%. The data reflects shifting market conditions and CAD’s relative strength.
Currency Market Outlook
Looking back at the analysis from early 2025, the bullish outlook for USD/CAD proved correct as the pair broke above the 1.4000 level later that year. We are now seeing the pair trade near 1.4150, supported by a clear divergence in economic momentum between the US and Canada. This ongoing strength suggests that options strategies favoring further upside should be considered.
The policy gap between the central banks is widening, creating a strong tailwind for the US dollar. Last week’s US Non-Farm Payrolls data showed a surprising addition of 215,000 jobs, while Canada’s own jobs report showed a net loss of 10,000 positions. This reinforces expectations that the Bank of Canada may need to consider rate cuts before the Federal Reserve does.
The Canadian dollar is also facing pressure from softer energy markets, a familiar headwind. WTI crude oil prices are currently hovering near $75 a barrel, down significantly from the highs we saw in the third quarter of 2025. Historically, periods of sustained weakness in oil below $80 have correlated with a weaker CAD.
Given this backdrop, we believe buying near-term call options on USD/CAD is a prudent strategy for the coming weeks. A target strike price around 1.4250 could offer a favorable risk-reward profile, capitalizing on the current momentum. Traders should monitor upcoming inflation data from both countries as the next major catalyst.
