USD/CAD extended a third straight day of declines, trading near 1.3780 in European hours on Wednesday, with price action contained within a descending channel on the daily chart. The pair remains below both the nine-day and 50-day Exponential Moving Averages (EMAs), with the shorter EMA sitting beneath the longer one, reinforcing a bearish near-term tone. Momentum gauges are also soft: the 14-day Relative Strength Index (RSI) was around 38, remaining in negative territory but not yet indicating oversold conditions.
Further downside could see the pair test the channel base around 1.3600, with the next level at 1.3481, the lowest since October 2024. Resistance is seen first at the nine-day EMA near 1.3819, then around the channel top close to the 50-day EMA at 1.3918; a move above that zone would shift the technical outlook and could open a path towards 1.4248, a nearly 17-month high set on 24 June 2026.
Bearish Trading Strategies And Market Rationale
Given the clear bearish momentum, we recommend that derivative traders target short positions using put options or bear put spreads. With the pair trading around 1.3780 and eyeing the 1.3600 channel bottom, a put option with a 1.3700 strike price offers an excellent risk-to-reward ratio. This approach allows us to profit from the downward trend while strictly limiting our upfront risk.
Our bearish stance is backed by the energy market, where WTI crude oil has recovered to trade near $69 per barrel, which naturally strengthens the Canadian Dollar. Furthermore, recent US data showing a cooling labor market with a 4.2% unemployment rate has increased the likelihood of upcoming Federal Reserve rate cuts. These shifting interest rate expectations should continue to drag the US Dollar down against the Loonie in the coming weeks.
Risk Management And Key Technical Levels
To manage our risk, we must place stop-losses or buy protective call options just above the key resistance level at 1.3918. A clean break above this 50-day moving average would invalidate our short bias and could trigger a sharp rally back toward the June high of 1.4248. Using these structured derivative strategies ensures we remain protected while capturing the ongoing downward move.
