USD/CAD has found key support at a four-month low of 1.3721. The 14-day RSI is at 33, below the midpoint, showing limited upward momentum. The pair is testing the upper edge of a downward wedge near 1.3790 and is currently trading around 1.3780 in Europe. Although the daily chart suggests some bullish potential, the overall trend remains bearish as the price is below both the nine-day and 50-day EMAs.

Technical Indicators

Moving averages are sloping down, with the nine-day EMA restricting upward movement, indicating a continued downtrend. Support levels are at 1.3721, 1.3710, and the psychological level of 1.3700, with potential pressure targeting 1.3539. Resistance is found at the wedge boundary around 1.3790, the nine-day EMA at 1.3811, and the 50-day EMA at 1.3928, which could trigger a recovery. A rise could aim for the three-week high of 1.4014. The Canadian Dollar is weakening against major currencies, especially the US Dollar. Technical analysis supported by an AI tool suggests that investment decisions should be made after thorough research, as markets carry inherent risks and uncertainties. USD/CAD is currently testing an important resistance level near 1.3790, which forms the upper edge of a downward wedge. While this pattern is usually seen as bullish, the moving averages indicate a continued downtrend. This creates uncertainty, and traders in derivatives should be alert for a significant break in either direction.

Investment Strategies

For those expecting a bullish breakout, a sustained move above 1.3811 would signal a good opportunity to buy call options expiring in late January or early February 2026. A confirmed break would validate the wedge pattern, potentially leading to movement toward the 50-day average at 1.3928. This viewpoint is supported by differing economic conditions in the US and Canada. For example, last week’s US employment report for November 2025 showed 195,000 new jobs, surpassing expectations and keeping the Federal Reserve cautious. In contrast, the Bank of Canada is dealing with a slowing economy, shown by retail sales dropping for the second month in October 2025. This divergence favors a stronger US dollar. Conversely, if the pair doesn’t break above 1.3800, the existing bearish trend could resume. Traders anticipating this may consider buying put options if the price falls below the key support level at 1.3721. A drop below this could indicate that sellers are in control, aiming initially for the psychological level of 1.3700. Additionally, consider the price of WTI crude oil, which has recently fallen to nearly $74 a barrel due to expectations of a mild winter and slower global growth. A similar situation occurred in late 2023, where dropping oil prices pressured the Canadian dollar. Continued weakness in the energy market could hinder the loonie and support the USD/CAD pair, even if the technical breakout doesn’t happen immediately. Create your live VT Markets account and start trading now.

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