USD/CAD fell for a fourth straight day, sliding to a near two-week low around 1.3525–1.3520 in Asia. The pair had traded both ways the day before, but a softer US Dollar and firmer crude oil helped lift the Canadian Dollar. Attention now turns to the US Nonfarm Payrolls report as the next major catalyst. The US Dollar has been under pressure as markets price in more Federal Reserve rate cuts and worry about the Fed’s independence. On the charts, USD/CAD is trading below the 50-day EMA (1.3757) and the 200-day EMA (1.3854) after topping near 1.3928 in early January. The pair fell 0.25% on Tuesday to 1.3525. Key support sits at 1.3481, then 1.3500, while resistance is around 1.3600–1.3650. The early-February rebound stalled near 1.3700. The Stochastic Oscillator (14, 5, 5) has also turned down from the midline. In Canada, January unemployment dropped to 6.5% and wage growth held at 3.3%. In the US, Retail Sales were flat (0.0%) versus a 0.4% forecast, and the Employment Cost Index rose 0.7% versus 0.8% expected. We view CAD strength versus USD as a trend that still has room to run, driven by mixed signals between the two economies. The technical setup also supports this view: USD/CAD is in a clear downtrend channel and trading well below key moving averages. That keeps “sell-on-rallies” as the preferred approach, even on small rebounds. Higher crude oil prices are an important part of this story. West Texas Intermediate has recently held above $80 a barrel, which supports the commodity-linked Canadian dollar and puts added pressure on USD/CAD. This outside support for the loonie makes short USD/CAD positions more attractive. The next major event risk is the US Nonfarm Payrolls report. With volatility elevated, options may be a better way to express a bearish view while controlling risk. For example, buying USD/CAD put options could benefit from further downside, especially if the jobs data is weaker than expected. Late-2025 data already pointed to this split. The US economy showed signs of slowing, while Canadian labour markets stayed tight. The US added 216,000 jobs in December 2025, but underlying details hinted at cooling. That backdrop has continued and supports the case for future Fed rate cuts. Canada looks different. January inflation came in at a still-firm 2.9%, which can keep the Bank of Canada more cautious. This policy divergence is the core theme. As the gap widens between US and Canadian rate expectations, USD/CAD should stay under downward pressure. From a technical standpoint, 1.3481 is the key support level. A clean break below it would raise the odds of a move toward 1.3400. Bearish option structures, such as put debit spreads, could target that next leg lower with strictly defined risk. History suggests this may not be a quick move. When central bank policy paths diverge, trends can last for months, as seen in 2015–2017. The current setup looks similar, so positioning for further downside in USD/CAD over the coming weeks still appears to be the more prudent approach.

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