Canadian Dollar Under Pressure
Some fundamentals have shifted against the Canadian Dollar, with front-end spreads widening in the US Dollar’s favour. Canadian terms of trade have also softened. USD/CAD has pushed through the low 1.38 area and moved above the 200-day moving average, which is at 1.3805. Short-term technical signals remain bullish after this break. Further gains are said to be possible towards the low 1.39s. Support levels are noted at 1.3790/00 and 1.3750/60. The report states the pair advanced through resistance in the mid-1.37s and then the low 1.38s. It also notes the article was produced with help from an artificial intelligence tool and reviewed by an editor.Looking Back At The 2025 Setup
Looking back at the analysis from 2025, we recall the view that the US dollar’s haven status was the primary force driving USD/CAD higher. The pair was trading significantly above its estimated fair value, breaking cleanly above key technical levels like the 200-day moving average. This created a clear bullish signal for the market at the time. Given the strong upward momentum observed last year, the move towards the low 1.39s was a credible target. This environment favored strategies like buying USD call options or selling CAD put options to profit from the expected rise. The defined support levels around 1.3750/60 offered clear points to manage risk on these bullish positions. The fundamental justification for that trend became reality as interest rate differentials widened through late 2025. The U.S. Federal Reserve maintained a hawkish stance due to persistent core inflation, which averaged 3.1% in the final quarter of 2025, while the Bank of Canada signaled a more dovish tilt. This policy divergence was a powerful catalyst that fueled the USD’s outperformance against the CAD. Furthermore, we saw Canadian terms of trade weaken as WTI crude oil prices slid to nearly $70 per barrel in December 2025. This contrasted with a resilient US economy that continued to post stronger job numbers than anticipated. These factors provided little independent support for the Canadian dollar, forcing it to follow the broader, strong-USD trend. As of today, March 26, 2026, the situation has evolved, with USD/CAD consolidating around the 1.36 handle. With WTI crude recovering to over $82 a barrel and recent Canadian inflation data for February 2026 showing a surprising uptick, the intense bullish pressure from last year has eased. We must now question whether the peak of USD dominance from that period has passed. In the coming weeks, traders should watch for a potential shift in this dynamic. While the bullish trend of 2025 was profitable, the current consolidation suggests a more balanced market. It may be prudent to consider strategies that can profit from either a range-bound environment or a new directional break, such as selling out-of-the-money strangles. Create your live VT Markets account and start trading now.
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