USD/CAD edged higher on Wednesday in European trading, hovering near 1.4210 after minor losses the previous session and sitting close to a near 15-month peak. On the daily chart, the pair remains within an ascending channel, and it is trading above the nine-day Exponential Moving Average (EMA), with the short-term EMA still running above the longer-term measure. Momentum indicators are stretched, as the 14-day Relative Strength Index (RSI) stands at 78.6, keeping the market in overbought territory and raising the risk of a pullback if buying pressure fades.
On the topside, resistance is centred on 1.4248, the near 15-month high set on June 24, and this area coincides with the channel’s upper boundary around 1.4320. A sustained break above that zone would shift focus to 1.4400. Support starts at the nine-day EMA at 1.4177; a drop below it would point to the lower channel boundary near 1.4040, with the 50-day EMA at 1.3947 as a further downside reference.
Drivers Of The Bullish Trend
We are watching the USD/CAD pair closely as it holds near 15-month highs, showing a clear bullish trend within its ascending channel. The recent US Non-Farm Payrolls report, which added a stronger-than-expected 285,000 jobs in June 2026, continues to fuel US dollar strength. This data reinforces the Federal Reserve’s recent hawkish stance, suggesting policy rates may remain elevated for longer.
This contrasts sharply with the Bank of Canada, which held its key interest rate at 4.25% last week while citing cooling domestic inflation. This policy divergence is a primary driver for the pair’s upward momentum. Adding further pressure on the loonie, WTI crude oil prices have struggled to hold above $75 per barrel, impacting the value of the commodity-linked Canadian dollar.
Trading Tactics And Risk Management
Given the strong upward momentum, we are looking at buying call options with strike prices targeting the 1.4300 to 1.4350 range, specifically with expirations in late July or August 2026. This strategy allows us to capitalize on a potential break of the 1.4248 high with defined risk. The ultimate target aligns with the ascending channel’s upper boundary near 1.4320.
However, we must remain cautious as the 14-day RSI sits above 78, indicating overbought conditions that could lead to a sharp pullback. A sudden drop in US inflation figures or a surprise rebound in oil prices could trigger profit-taking. This market is showing strength similar to the run-up we saw in early 2020, though this time it’s driven more by interest rate differentials than global risk aversion.
To manage this risk, we are setting alerts at the nine-day EMA of 1.4177, which is the first line of defense for the current trend. A confirmed break below this level would signal a loss of momentum and could prompt us to hedge our long positions. For this scenario, we are pricing out put options with a strike price near 1.4150 as a potential portfolio protection strategy.
