Insights 
VT 
USD/CAD Short-Term Momentum
The short-term momentum is indicated as robust, with the pair remaining above the nine-day Exponential Moving Average. The 14-day RSI also supports a bullish bias, positioned above the 50 level.
Potential upside for USD/CAD targets the rectangle’s upper boundary of 1.4060, and the seven-month high of 1.4079 from October 14. Surpassing this resistance could test the psychological threshold of 1.4100.
The main support level is at 1.4000, with the nine-day EMA at 1.3994. Drops beneath this could weaken momentum, leading to testing the rectangle’s lower boundary near 1.3930, aligning with the 50-day EMA at 1.3926.
A decline below confluence support may activate a bearish trend, exploring levels around the August low of 1.3721. The Canadian Dollar was weakest against the Australian Dollar in percentage change comparisons with major currencies today.
Options Strategy and Fundamental Drivers
Given the USD/CAD’s push above the 1.4000 level, we see a clear path toward the 1.4060 resistance in the coming weeks. The bullish momentum suggests that buying call options with a strike price around 1.4050 could be a viable strategy to capitalize on this upward trend. This move is supported by a Relative Strength Index that remains firmly above 50.
This outlook is reinforced by fundamental factors, as recent US jobs data from October showed a solid addition of over 210,000 jobs, strengthening the US dollar. At the same time, WTI crude oil prices have struggled to stay above $75 a barrel, placing consistent pressure on the Canadian dollar. We see this divergence as a key driver for the pair’s strength.
However, we must also consider the risk of a reversal, with initial support at the 1.4000 mark. Traders concerned about a failed breakout could consider buying put options with a strike near 1.3950 to hedge against a drop toward the rectangle’s lower boundary. A breakdown below this area would signal a significant shift in market sentiment.
The policy divergence between central banks also supports a higher USD/CAD, as Canada’s latest inflation figures trended slightly below the Bank of Canada’s target. We recall similar periods of widening rate differentials in 2024, which often preceded sustained moves in the pair. This environment makes holding long USD positions against the CAD fundamentally sound.
Considering the pair is trading within a defined range, a breakout is likely to increase volatility. For those anticipating a sharp move but uncertain of the direction, establishing a long straddle could be an effective strategy. This would involve buying both a call and a put option to profit from a significant price swing out of the current consolidation pattern.
