The Canadian Dollar is holding steady against the US Dollar, with a slight uptick as it stabilizes after a decline in December. The recovery in oil prices is helping support the Canadian currency, while the gap between interest rates is narrowing, which had previously contributed to a weaker CAD. The USD/CAD pair’s rise has slowed below important resistance levels, such as the 50-day moving average at 1.3887 and the significant 1.39 mark. The RSI is showing a decline from recent highs, suggesting that momentum is fading.

Near Term Domestic Risks

Currently, domestic risks appear limited, as there are no upcoming Bank of Canada speeches before the next rate decision. The currency is expected to remain stable, fluctuating between 1.3820 and 1.3920. For more FX insights and market updates, refer to the FXStreet Insights Team, which includes journalists and analysts who provide valuable information on current market trends. This information serves as guidance, encouraging thorough research before making financial decisions. The Canadian dollar is maintaining its position against the US dollar, trading within a narrow band after falling from late December heights. A rise in oil prices is giving some support to the CAD. Additionally, interest rate differentials are adjusting favorably, tightening after widening late last year. The Bank of Canada is likely to be more cautious about cutting rates after Canada’s latest Consumer Price Index (CPI) for December 2025 came in at 2.9%, slightly above forecasts. This contrasts with the US Federal Reserve, which seems more inclined to ease its policies. Meanwhile, WTI crude is stabilized above $85 a barrel, further enhancing the outlook for the loonie.

Historical Patterns Observed

Historically, the USD/CAD rally stalled in late 2025 just below the 1.3600 resistance level, linking with the 200-day moving average. For derivative traders, this implies that selling call options with strikes above 1.3600 could be beneficial, taking advantage of the strong resistance. Momentum indicators like the RSI have turned down from overbought territory, indicating that upward pressure is decreasing. In this context, we anticipate a near-term trading range for the pair between 1.3350 and 1.3550. Traders might consider using put option spreads to position for a gradual decline toward the 1.3350 support level. This approach limits risk while allowing for potential CAD strength as we approach the Bank of Canada’s next meeting on January 25th. It’s worth noting that historical trends often show the Canadian dollar strengthening toward the end of January. This seasonal pattern offers additional support for strategies that are optimistic about the CAD. Create your live VT Markets account and start trading now.

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