Insights 
VT 
USD/CAD is on the rise, currently trading around 1.4030, and potentially moving towards 1.4050. The pair is showing signs of a bullish reversal within its ascending channel, with the 14-day Relative Strength Index above 60 reinforcing this outlook.
There is primary support at the nine-day Exponential Moving Average of 1.4016. If the pair maintains its upward momentum, it could test the six-month high of 1.4079, and potentially reach the upper boundary of the channel at 1.4170.
Downward Pressure on USD/CAD
Conversely, if USD/CAD fails to hold above 1.4016, it could face downward pressure towards 1.3894, which is the 50-day EMA. Further declines might see the pair reaching the three-month low of 1.3721.
In recent changes of major currencies, the Canadian Dollar was weakest against the New Zealand Dollar. The currency’s performance offers a percentage representation, such as a 0.10% decrease in AUD/CAD. These statistics provide insight into currency movements, allowing expectations for ongoing trading patterns.
We are seeing the USD/CAD pair show signs of renewed strength, attempting to rebound around the 1.4030 level within its clear upward trend. The underlying momentum remains bullish, as key indicators like the 14-day Relative Strength Index are holding firm above 60. The first critical line of support we are watching is the nine-day average at 1.4016.
This upward pressure on the pair is being amplified by softness in the energy markets, which directly impacts the value of Canada’s currency. West Texas Intermediate (WTI) crude oil has been struggling to hold the $85 per barrel mark, with prices falling nearly 5% over the past month. This continued weakness in a key Canadian export makes the US dollar a more attractive asset in comparison.
Diverging Monetary Policy
Diverging monetary policy is also a major factor we are tracking, as recent data suggests the US Federal Reserve will remain more aggressive than the Bank of Canada. US core inflation last month came in at 3.6%, while the Canadian equivalent has cooled to 2.9%, fueling speculation the Fed will hold rates higher for longer. This interest rate differential continues to favor holding US dollars over Canadian dollars.
For derivative traders, this technical setup suggests buying call options with strike prices just above the recent six-month high of 1.4079 could be a viable strategy. A successful break of that level, which we saw briefly on October 14th, would open the door for a move toward the 1.4170 area. Implied volatility remains manageable, suggesting option premiums are not yet prohibitively expensive for such a trade.
Conversely, we must treat the 1.4016 level as a crucial pivot point for the short term. A firm break and close below this support would signal that the bullish momentum is fading, potentially triggering a slide toward the 50-day average near 1.3900. Traders could use this level as a trigger to either take profits on long positions or purchase put options as a hedge.
We are also seeing this sentiment reflected in the broader market, where large speculators are positioned for further Canadian dollar weakness. The latest Commitment of Traders report showed that non-commercial futures contracts increased their net short positions on the CAD by over 12,000 contracts. This build-up of bets against the loonie confirms that institutional money anticipates more downside ahead.
