Insights 
VT 
Immediate Support And Targets
Immediate support is found at the June high of 1.3797. Sustaining a position above this level maintains buyer control and supports the breakout narrative. Falling back below could thrust the pair back into the previous range and weaken momentum.
On the upside, the next target is the May 29 high at 1.3859. Surpassing this point could lead toward a dynamic swing zone between 1.3928 and 1.3978, characterised by multiple highs and lows.
Current key levels include a support level at 1.3797, serving as the former range top. The initial resistance is at 1.3859, the May 29 high. Should the upward trend continue, the target zone extends from 1.3928 to 1.3978.
With USDCAD breaking above its 100-day moving average, we see a clear signal that the recent downtrend may be reversing. This move above 1.38279 is our first cue to shift from a bearish to a neutral or bullish stance. In the coming weeks, we should prepare for a potential rally toward higher targets.
Technical Analysis And Strategies
For those looking to position for upside, buying call options is a straightforward strategy. We could look at August or September expirations with a strike price around 1.3850 to play the initial move. This would allow us to capture gains if the pair continues toward the 1.3900 level while clearly defining our maximum risk.
This technical breakout is supported by diverging central bank policies. The Bank of Canada is sounding more open to rate cuts after June 2025’s inflation eased to 2.6%, while the US Federal Reserve remains firm following a surprisingly strong services report last week. This growing policy gap fundamentally favors a stronger US dollar against the Canadian dollar.
Adding to the pressure on the Canadian dollar, we have seen WTI crude oil prices soften, dipping below $78 a barrel this month amid worries over global demand. Historically, a sustained drop in oil prices has often coincided with USDCAD strength, as it did during the oil price decline in late 2023. This commodity weakness provides another reason for us to favor a higher exchange rate.
To manage risk, we might consider a bull call spread instead of an outright call purchase. We could buy the 1.3850 call and sell the 1.3950 call, which would lower the upfront cost of the trade. This is a good approach if we believe the rally may stall near the key resistance zone around 1.3928–1.3978.
We must watch the 1.3797 support level closely, as a break back below it would invalidate this bullish setup. If that support fails, the momentum would shift, and we would need to exit our long positions. Such a failure might even prompt us to look at buying put options to trade a move back into the old range.
