The Canadian Dollar (CAD) is strengthening as the US Dollar (USD) shows signs of weakness. Scotiabank has noted that while CAD has struggled due to lower oil prices and unchanged supportive spreads, there are signs of recovery. After a post-Christmas rally, the USD’s upward movement seems to be slowing down. Recent losses bring the USD closer to a fair value of 1.3857, which could allow the CAD to improve further if the USD declines.

Intraday Price Signals

Current intraday price signals suggest that the USD’s recent upward trend might pause or reverse. A price pattern forming on the daily chart indicates resistance for the USD around the low to mid 1.39 range, with support currently at 1.3850. The FXStreet Insights Team, made up of experienced journalists and analysts, offers valuable market observations. Their insights draw from both internal and external expert analyses. The strong performance of the US dollar since late last year is starting to weaken. This change could benefit the Canadian dollar, which has been under pressure. Traders should watch for this potential shift in the USD/CAD currency pair.

Significant Resistance Encounter

The USD/CAD pair is facing strong resistance in the low to mid 1.39 range, indicating that the USD’s gains might be limited. A daily chart pattern supports this perspective, with initial support around the 1.3850 level. This outlook is strengthened by a recent rise in WTI crude oil prices, which have increased over 4% to nearly $75 per barrel since the beginning of the year, giving a boost to the Canadian dollar. Additionally, the US jobs report for December 2025 was softer than anticipated, showing only 165,000 new non-farm payrolls compared to the expected 190,000. This data alleviates pressure on the Federal Reserve and weighs on the US dollar. Given this situation, traders might want to consider buying Canadian dollar call options to bet on further increases. Another strategy could be to sell out-of-the-money USD/CAD call spreads with strike prices above 1.3950, which would be profitable if the pair stays stable or declines. These strategies are designed to take advantage of a trend reversal we observed at the end of 2025. A similar pattern occurred at the start of 2024, when the year-end USD rally lost momentum in the first quarter, allowing commodity-linked currencies like the CAD to gain strength. Past trends suggest that these early-year reversals can be impactful. Traders should keep this seasonal trend in mind. For those already facing a weaker Canadian dollar, now could be an ideal time to hedge. Purchasing near-term USD/CAD call options could provide protection against a sudden reversal, should the USD regain strength. This would be a wise strategy for managing risk in case this current stall is temporary. Create your live VT Markets account and start trading now.

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