Immediate Support and Targets

Immediate support is at the June high of 1.3797. Staying above this level shows that buyers are in control and supports the breakout story. If the pair falls below, it could drop back into the previous range and lose momentum. On the upside, the next target is the May 29 high at 1.3859. If this level is crossed, it could lead to a swing zone between 1.3928 and 1.3978, which has seen multiple highs and lows. Current key levels include support at 1.3797 and resistance at 1.3859, the May 29 high. If the upward trend continues, we look towards the target range of 1.3928 to 1.3978. USDCAD has broken above its 100-day moving average, signaling that the downtrend may be reversing. Moving above 1.38279 suggests we might shift from a bearish to a neutral or bullish stance. In the upcoming weeks, we could see a rally towards higher targets.

Technical Analysis and Strategies

For those aiming for a rise, buying call options is a simple strategy. We can consider August or September expirations with a strike price around 1.3850 to catch the initial move. This allows us to profit if the pair rises towards 1.3900 while limiting our risk. This technical breakout is supported by different central bank policies. The Bank of Canada is more open to rate cuts now that inflation eased to 2.6% in June 2025, while the US Federal Reserve remains strong after a positive services report. This policy gap favors a stronger US dollar against the Canadian dollar. Additionally, WTI crude oil prices have fallen below $78 a barrel this month due to worries about global demand. Historically, a sustained drop in oil prices has often led to USDCAD strength, as seen during late 2023. This weakness in commodities is another reason to expect a higher exchange rate. To manage risk, a bull call spread may be better than buying a call outright. We could buy the 1.3850 call and sell the 1.3950 call, which would reduce the cost of the trade. This is a smart option if we think the rally may stall near 1.3928–1.3978. We should closely monitor the 1.3797 support level. If it breaks, this bullish setup will be invalidated. A failure here would shift momentum, prompting us to exit long positions and possibly consider buying put options to trade a move back into the previous range. Create your live VT Markets account and start trading now.

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