The Canadian Dollar (CAD) has been losing value since the holidays, reaching the upper 1.38s range after Christmas. This decline is mainly due to weak crude oil prices and a low appetite for risk, alongside a rebound in the US Dollar (USD). The USD/CAD pair is approaching a resistance level in the upper 1.38s, linked to past market behavior. Even with factors supporting the CAD, like spread differentials, the USD has surpassed its 200-day moving average, hinting at further upward movement.

Potential Market Movements

If the USD breaks above the 1.39 mark, it may rise further towards 1.3950/00. Current support is at 1.3810/20, marking potential retracement areas. The FXStreet Insights Team, made up of both commercial and internal analysts, shares market observations meant for information, not as financial advice. They emphasize the risks involved with market investments. This article also highlights various brokers for trading, outlining their advantages and disadvantages. A cautionary note advises that the information should not be considered investment advice, and readers should conduct their own research. FXStreet disclaims responsibility for any errors, omissions, or inaccuracies in their publications. Since the holidays, the Canadian dollar has steadily weakened, causing the USD/CAD exchange rate to sit in the upper 1.38s. This shift is driven by declining crude oil prices and a general strengthening of the US dollar. The market is currently testing a key resistance area identified from the highs of October 2025. The pressure on the CAD is partly due to the energy market trends. WTI crude prices have dropped from over $80 a barrel in late 2025 to around $72 this past week. This ongoing decline in a major Canadian export is creating challenges for the currency, making it hard for the CAD to find support even when interest rates might favor it.

Trading Strategies

For traders, this situation offers a chance to use options to manage risk around this resistance level. Given the market’s uncertainty, buying February call spreads—like purchasing a 1.3850 call and selling a 1.3950 call—could be a smart move. This strategy allows participation in potential gains if the US dollar rises while limiting the trade’s initial cost if the price movement stalls. The US dollar’s strength has been supported by recent economic data, especially a strong jobs report for December 2025, which showed the economy adding 216,000 jobs. This number significantly outperformed Canada’s employment report, which indicated a meager gain of just 100 jobs for the same month. This economic difference is leading markets to favor the USD, outweighing previously encouraging Canada-US interest rate spreads. A sustained break and daily close above the 1.3900 level would suggest more bullish momentum ahead. Such a move would signal a good opportunity for strategies that profit from continued climbs towards the 1.3950 and 1.4000 psychological levels. Traders might consider buying call options with longer expiration dates like March or April to allow the trend to develop fully. On the other hand, watch for key support around the 1.3810/20 mark. A strong rejection from the current highs followed by a drop below this support zone could indicate that the US dollar’s rebound has peaked for now. In this case, traders might use put options to protect long positions or speculate on a decline towards the mid-1.37s. Create your live VT Markets account and start trading now.

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