The Canadian Dollar (CAD) has gained ground, reaching the low 1.38s due to a weaker US Dollar (USD). This shift is not influenced by internal factors according to Scotiabank’s strategists.<\/p>\n
The USD\/CAD has broken key support levels, indicating potential further declines. The CAD is currently trading just above its fair value of 1.3865, a position not seen since early in the year.<\/p>\n
Slightly stronger than expected Canadian inflation data and a marginally improved Business Outlook Survey for Q4 have supported the CAD. Despite this, the primary driver of the CAD’s current strength is the generally weaker USD.<\/p>\n
The USD\/CAD losses through key levels at 1.3855\/60 are targeting short-term lows at 1.3790\/95. Recent trading patterns show USD stalling against major moving averages and falling under the 200-day MA signal. Continued USD declines throughout the week may confirm strong resistance in the low 1.39 zone, with possible further weakness ahead.<\/p>\n
Looking back a year to January 2025, we saw the USD\/CAD pair break below key support at 1.3855, a move driven almost entirely by broad weakness in the US dollar. At the time, Canadian-specific factors like inflation were only a minor part of the story. The technical breakdown then pointed towards further downside for the pair.<\/p>\n
As of today, January 20, 2026, that downward trend has continued, with the pair now trading near 1.3550. Unlike last year, however, this strength is now supported by distinctly Canadian factors, including a more hawkish tone from the Bank of Canada concerned about persistent wage growth. The latest Labour Force Survey from Statistics Canada, which showed a robust gain of 55,000 jobs in December 2025, further reinforces this domestic strength.<\/p>\n
This CAD-positive narrative is amplified by external factors, as West Texas Intermediate crude oil prices are holding firm above $85 a barrel. This contrasts with recent data out of the United States, where December 2025 retail sales came in weaker than expected, falling by 0.5% and adding to pressure on the US dollar. The combination of strong Canadian data and firm oil prices creates a much stronger fundamental case for CAD appreciation than we saw a year ago.<\/p>\n
Given this environment, traders should consider positioning for further downside in USD\/CAD in the coming weeks. Buying put options on USD\/CAD with strike prices around 1.3400 could offer a favorable risk-reward profile to capitalize on this downward momentum. For those with existing US dollar exposure, hedging against further CAD appreciation through forward contracts or options collars is now a prudent strategy.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canadian Dollar strengthens as USD weakens, breaking support levels; CAD nears fair value amid market shifts.<\/p>\n","protected":false},"author":62,"featured_media":16963,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-39661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/39661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=39661"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/39661\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16963"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=39661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=39661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=39661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}