The USDCAD has remained above its cluster of moving averages, suggesting buyer control. Still, sellers exert pressure, with the pair trading lower today.
At the end of last week, USDCAD tested its 100-day moving average at approximately 1.37631. This support helped push the pair higher leading into the weekend, closing near the weekly high.
Early Week Movement
This week started with downward pressure, but buyers turned the situation around. After the price tested the rising 200-bar moving average twice on the 4-hour chart at 1.37967, it rebounded above the 100-bar moving average at 1.3818, benefiting the bulls’ momentum. Holding these levels has supported an upward bias.
Despite this, the rally didn’t reach key targets. The week’s highs missed the August 1 high of 1.3878, a swing area from 1.3891–1.3904, and the 38.2% retracement from the March high at 1.39235. This retracement level aligns with the August 22 high, posing a barrier for buyers.
If USDCAD can stay above key moving averages, the upward momentum persists. Buyers need to overcome the 38.2% retracement at 1.39235 for more upside potential, challenging bearish control since February.
We are seeing the USDCAD hold above its key moving averages, which suggests buyers have the upper hand for now. This technical strength is likely supported by the latest Canadian employment report from last week, which showed a surprising drop of 12,000 jobs, weakening the Canadian dollar. The price holding the 100-day moving average around 1.3763 is a constructive sign for a continued move higher.
Investment Strategies
Given that the rally has shown signs of stalling, a straightforward long position is risky, making options a useful tool. Buying call options with strikes around 1.3850 for expiry in the next few weeks could be a prudent way to participate in potential upside. This strategy clearly defines our maximum risk to the premium paid while we wait to see if buyers can push through resistance.
The most critical level to watch is the 1.39235 resistance, which marks the 38.2% retracement from the high we saw back in March 2025. With the latest US inflation data from August 2025 coming in slightly hotter than expected at 3.4%, a decisive break above this level could trigger a rapid move up. If we see a daily close above that price, it would be a strong signal to consider more aggressive bullish strategies.
However, we must respect the potential for failure and the support near the 1.3800 level. A break below this would indicate that sellers are taking back control, a pattern we saw during similar periods of uncertainty back in 2024. For this reason, holding some out-of-the-money put options with strikes below 1.3750 could serve as an effective hedge against a sharp reversal.
We also need to factor in the price of crude oil, which has a significant impact on the Canadian dollar. Western Canadian Select (WCS) prices have recently dipped below $80 a barrel for the first time in two months, providing a tailwind for USDCAD. Any rebound in oil could slow this pair’s ascent, making it a key variable to monitor alongside the technical picture.
