USD/CAD stayed positive after modest gains in the prior session, trading near 1.3580 during European hours on Thursday. The daily chart keeps the pair inside a descending channel, which points to a bearish bias.
The 14-day RSI is 39, which signals weak upside momentum after a small rebound. Price remains below the falling nine-day EMA and 50-day EMA, with both averages sloping down.
Key Support Levels
Support is seen near 1.3500, described as the “Support Bounce” level and a psychological area. If the pair drops below 1.3500, it may move towards the channel base near 1.3220.
To reduce selling pressure, the pair would need a close back above the nine-day EMA at 1.3607. Further resistance is near the upper channel boundary around 1.3690 and the 50-day EMA at 1.3743.
A move above 1.3743 could open the way to the two-month high of 1.3928, set on January 16. The technical analysis was produced with help from an AI tool.
We see the USD/CAD pair is testing the 1.3600 barrier, which is a key resistance level for us. The price remains locked within a descending channel pattern, suggesting the path of least resistance is still downwards. This keeps a bearish outlook for the coming weeks.
Fundamental Drivers
This technical view is being tested by fundamental data, specifically the recent US inflation print coming in hotter than expected at 3.3%. A strong dollar on the back of this news could challenge the downtrend, making short positions riskier. We need to see if the price can actually break above the 1.3607 moving average to confirm any real strength.
On the other hand, the Canadian dollar is finding support from a strong domestic jobs report and WTI crude oil prices firming around $85 a barrel. These factors strengthen the case for our bearish bias on the pair. This aligns with the weak momentum shown by the RSI indicator, which is still below 50.
For derivative traders, this suggests a strategy of buying put options with a strike price below the 1.3500 psychological level, anticipating a move towards 1.3220. These positions would benefit if the bearish channel holds true over the next few weeks. The weak momentum shown by the RSI might make these options relatively inexpensive.
We must also consider the risk of a reversal, remembering the sharp rally we saw in late 2025 when central bank policies diverged. A decisive break above the channel around 1.3690 could invalidate the bearish setup, making call options attractive. Such a move would target the January high near 1.3928.
