USD/CAD stayed in positive territory after small gains in the previous session. It traded near 1.3580 during European hours on Thursday. On the daily chart, the pair remains inside a descending channel, which suggests a bearish bias.
The 14-day RSI is 39. This points to weak upside momentum, even after a minor bounce. Price is still below the falling nine-day EMA and the 50-day EMA, and both moving averages are trending lower.
Key Support Levels
Support is near 1.3500. This is a key psychological level and is often seen as a “Support Bounce” area. If the pair breaks below 1.3500, it could fall toward the bottom of the channel near 1.3220.
To ease selling pressure, the pair would need to close back above the nine-day EMA at 1.3607. Additional resistance sits near the upper channel line around 1.3690, and at the 50-day EMA near 1.3743.
A break above 1.3743 could open the door to the two-month high of 1.3928, set on January 16. This technical analysis was produced with help from an AI tool.
USD/CAD is also testing the 1.3600 area, which is an important resistance level. The price is still confined to a descending channel, so the easier path remains lower. This keeps the outlook bearish for the coming weeks.
Fundamental Drivers
This technical setup is being challenged by recent fundamental data. US inflation came in hotter than expected at 3.3%. That supports the US dollar and could put the downtrend at risk, making short positions more vulnerable. The key question is whether price can break and hold above the 1.3607 moving average, which would signal real strength.
At the same time, the Canadian dollar is getting support from a strong domestic jobs report and firmer WTI crude oil prices near $85 per barrel. These factors support the bearish case for USD/CAD. They also match the weak RSI reading, which remains below 50.
For derivatives traders, this may favor buying put options with strikes below the 1.3500 psychological level, targeting a possible move toward 1.3220. These positions benefit if the bearish channel holds over the next few weeks. With RSI momentum still weak, option premiums may be relatively lower.
Reversal risk still matters. The sharp rally in late 2025, driven by diverging central bank policy, is a reminder that trends can flip quickly. A clear break above the channel near 1.3690 could invalidate the bearish setup and make call options more appealing. In that case, the next target would be the January high near 1.3928.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
