Insights 
VT 
The USDCAD is experiencing a decline, influenced by stronger-than-expected Canadian manufacturing sales and a weaker US Empire manufacturing index. Currently, the pair is testing the 100-bar moving average on the 4-hour chart at 1.3814 and the 200-bar moving average at 1.38067. The session low reached 1.38144.
This area is a critical zone for both buyers and sellers. Buyers aim to use this cluster for a potential rebound. Conversely, sellers are seeking a break below this cluster to push prices lower. Despite the bearish movement, the pair has struggled to move above the swing area between 1.3878 and 1.3917 from last week.
Moving Average Support Level
The 200-bar moving average continues to serve as a noteworthy support level. This has made it a vital area to monitor in the ongoing competition between buyers and sellers. Both sides are vying for control, with the potential to influence future price directions.
We are seeing the USDCAD testing a critical support zone around the 1.3810 area, which has become a key battleground. This move lower is fueled by today’s stronger Canadian manufacturing sales and a weaker-than-expected US Empire manufacturing index. This aligns with a recent trend of resilient Canadian data versus softening US figures.
Sellers are pointing to Canada’s August jobs report, which came in strong at +45,000, keeping the unemployment rate at a stable 5.7%. The Bank of Canada has consequently maintained a more hawkish tone, signaling that interest rates may need to stay elevated. This fundamental backdrop supports further Canadian dollar strength.
US Market Conditions
On the US side, the picture is less robust, which is weighing on the pair. The last Non-Farm Payrolls report added a modest 155,000 jobs, missing expectations, and the latest CPI data showed a slight cooling of inflation to 3.4%. This is increasing market chatter that the Federal Reserve is finished with its rate-hiking cycle for now.
This divergence makes the technical level around the 200-period moving average at 1.3806 immensely important for derivative traders. A firm break below this zone could see put option volume increase as traders target the 1.3700 handle. Conversely, a strong bounce would embolden bull call spread strategies, betting that this long-term support will hold once again.
We have seen this 1.3800 level act as a significant floor multiple times, particularly during the volatility we observed in early 2024. In the coming weeks, a daily close below this support would be a strong bearish signal, potentially shifting the medium-term trend. The failure to break above the 1.3900 resistance last week adds weight to the view that the upside momentum is exhausted.
