The USDCAD pair gained some ground after the Bank of Canada cut interest rates by 25 basis points. Initially, the pair rose above its 100-day moving average, hitting a session high of 1.3769, but then momentum faded. Afterward, the pair fell below the 100-day moving average and is now trading at 1.3758. It re-entered a swing area between 1.37437 and 1.3759. If it declines further, it may target the session low of 1.3738, which aligns with a head-and-shoulders neckline. Below that, the next target is 1.3721, the low from August 7.

Importance Of Technical Levels

For sellers, keeping the price below the 100-day moving average is crucial. If the pair can rise and stay above this level, it might target the converged 100- and 200-hour moving averages at 1.3802, which could lead to more gains. These technical levels help us understand potential support and resistance, guiding the USDCAD pair’s next moves. The outlook depends on whether the pair holds its current position or manages to rise above these averages. Earlier this summer, the Bank of Canada’s rate cut prompted an initial spike in USDCAD above the 100-day moving average. However, the market couldn’t maintain those gains, indicating significant indecision. This indecision continues as the pair stays around that important technical level.

Fundamental Picture And Option Strategies

Since the rate decision, the fundamental picture has become clearer, favoring a stronger U.S. dollar. U.S. core inflation has stayed stubbornly above 3.1% through August 2025, while Canadian CPI dropped to 2.4% last month. This difference in policy, with the Federal Reserve staying firm, supports a long-term upward trend for the pair. For those expecting an upward breakout, buying call options with a strike price near 1.3800 could be a smart choice. This strategy allows traders to benefit from a move towards the old 200-hour moving average target while managing risk. The recent U.S. jobs report, which showed a solid gain of 215,000 jobs, adds credibility to this bullish view. On the other hand, if the pair breaks below the 1.3743 swing area, it suggests that sellers are gaining control, despite the positive fundamentals. In this case, buying put options with a strike around 1.3720 could help protect against or profit from a decline towards the August lows. This recognizes the technical weakness indicated by the failure at the 100-day moving average. As the price is tightly coiling, we might also explore volatility strategies. A long straddle, which involves buying both a call and a put option at the current price, can profit from a significant price movement in either direction. This approach allows us to trade the market’s uncertainty without needing to predict the direction of the potential breakout. In the end, our short-term strategy should be based on the 100-day moving average, currently near 1.3760. If there’s a sustained move above this level, we should consider increasing our bullish position. Conversely, a strong rejection from this point would signal a possible test of lower support levels. Create your live VT Markets account and start trading now.

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