The Canadian Dollar is trading close to where it ended on Friday against the US Dollar, just under its fair value of 1.3798. Analysts expect a short-term pause in USD losses, with a trend that supports stronger CAD. They predict resistance will occur around 1.3850–1.3875 if the USD bounces back moderately.
Short Term Indicators
Scotiabank strategists point out that the CAD remains near its Friday exchange rate against the USD, just below the estimated fair value. This suggests the potential for the CAD to strengthen further. They mentioned that if USD/CAD falls below 1.3769, it could indicate continued USD losses toward the 1.35/1.36 range, but the CAD narrowly missed maintaining that gain.
Current short-term indicators show that the USD might stabilize after recent losses, but limited gains are expected. Resistance is likely in the 1.3850/75 range during any moderate rebounds in USD. The FXStreet Insights Team gathers findings from both external and internal analysts for a comprehensive view.
The Canadian Dollar remains strong against the US Dollar, indicating the potential for more CAD strength. Traders might want to position themselves for a lower USD/CAD exchange rate, possibly by buying put options on the USD/CAD pair or by selling futures contracts.
This outlook is backed by recent economic data from late November 2025, which showed that the Canadian economy added 25,000 jobs, reflecting its resilience. Such economic strength gives a solid reason for the CAD to keep gaining against the USD.
Policy Divergence
Differences in central bank policies are also significant. The Bank of Canada maintained its interest rate at 5.0% in early December 2025 and adopted a cautious stance. Meanwhile, new data shows that US inflation has slowed to 3.1%. This could mean that the Federal Reserve will ease its policy sooner than the BoC, which could negatively impact the USD.
While the USD is currently oversold and might see a slight rise, we believe any upward movement should be viewed as a chance to sell. The 1.3850 to 1.3875 range is considered a strong resistance level. Traders could take advantage of a modest rebound in USD to establish new short positions at better prices.
If the USD/CAD pair drops below the important 1.3769 level, it would confirm a downtrend. We would then aim for a move toward the 1.35 to 1.36 range in the coming weeks, following a significant part of the rally observed in the latter half of 2025.
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