The Canadian Dollar has stayed mostly stable after a day of gains as markets begin to stabilize. Analysts see signs that the USD/CAD could lose more ground, which is suggested by recent technical patterns. Prime Minister Carney spoke about the need for Canada to build new international relationships as global dynamics change. Even though commodity prices are rising, Canada’s trade situation remains weak due to low crude oil prices.

Bearish Pattern

Current patterns suggest a short-term risk of further USD/CAD declines. If the USD support around the mid-1.38 range is lost, the pair could fall to 1.3785/90 and possibly drop below 1.37. Increasing metal prices aren’t boosting the CAD as much as they are for the Australian Dollar or Chilean Peso. Resistance is expected around 1.3850/55, then at 1.3890/00. This analysis does not provide personalized recommendations, and readers should conduct their own research. Market data carries its own risks and uncertainties, emphasizing the importance of careful personal evaluation. The Canadian Dollar is solidifying its recent strength. The technical setup on the USD/CAD hourly chart suggests further losses for the pair. The bearish flag pattern signals that we should prepare for another downward move soon. The immediate aim should be to anticipate a stronger Canadian Dollar against the US Dollar.

Break of Support

We think that a break of support in the mid-1.38 range may lead to a fall to the 1.3785 level. Traders might consider buying put options with a 1.3750 strike that expire in the next two to three weeks to take advantage of this expected movement. Resistance at 1.3850 should limit any short-term rallies of the US Dollar. We’ve observed that the traditional relationship between the loonie and oil prices has weakened, a trend that became clear in 2025. The correlation over the past 90 days between the CAD and WTI crude prices has dropped to just 0.4, down from the usual above 0.7. This suggests that even with lower crude prices, the CAD may find support elsewhere, particularly from strong base metal prices. Recent trader reports show that large speculators have shifted to a net-long position on the Canadian Dollar for the first time in over eight months. This change from last year’s heavy net-short positioning indicates that institutional sentiment is now supporting a stronger CAD. We see this as a confirmation of the underlying bullish trend. The interest rate gap continues to favor the Canadian Dollar since the Bank of Canada has kept its policy rate steady at 5.0%. Meanwhile, futures markets are predicting a higher chance of a Federal Reserve rate cut by mid-year. This policy divergence supports our medium-term positive outlook for the CAD, giving it a solid foundation. With implied volatility in USD/CAD options at its lowest level in three months, strategies like buying puts are relatively affordable right now. This is a stark contrast to the volatility we experienced last year during the political noise from Davos. This environment offers a good risk-reward opportunity to position for further USD/CAD weakness. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now