The Canadian Dollar (CAD) has seen a slight rise against a generally weaker US Dollar (USD), yet it remains within its recent range. Economic factors, particularly trade trends, have a small impact on the CAD, with its fair value estimated at 1.3865. The USD/CAD exchange rate is facing resistance around the 1.39 mark. Chart patterns indicate a neutral to bearish outlook in the low 1.39 range, with a ‘harami’ candle pointing to possible changes. Additionally, there’s a potential double top formation around 1.3925 from recent trading sessions.

Exchange Rate Patterns

If the exchange rate drops below 1.3855, it would confirm the double top, targeting 1.3780/90. On the other hand, if it rises above 1.3925, the next target would be between 1.3950 and 1.4000. Insights into these movements come from Scotiabank’s Chief FX Strategists, whose analyses contribute to market understanding. The Canadian dollar is making some progress as the US dollar weakens, yet the currency pair is stuck in a familiar range. The USD/CAD rate appears to be losing momentum as it hovers near the 1.39 mark, indicating a time of indecision in the market. Chart patterns are giving a warning for the US dollar, showing a minor double top around 1.3925. For traders using derivatives, this suggests a chance to buy USD/CAD put options that expire in the coming weeks. A drop below 1.3855 would be the signal we are looking for to confirm this bearish view, aiming for a decline towards the 1.3780 area.

Economic Influences

However, several key economic factors are limiting the CAD’s ability to rise. The difference in short-term interest rates still heavily favors the US, with recent data showing US 2-year yields outperforming Canadian bonds by 45 basis points. Additionally, WTI crude oil prices, which significantly impact the Canadian economy, have remained stuck around $81 per barrel, lacking a fresh catalyst for strength. This situation is reminiscent of a similar trend in the third quarter of 2025, where strong economic data from the US overshadowed technical signals. With recent inflation data showing US core CPI at 3.2% compared to Canada’s 2.6%, the fundamental case for a stronger US dollar remains intact. Selling out-of-the-money call spreads above the 1.3950 resistance may be a wise strategy to earn premiums while betting the pair won’t break higher. Conversely, if the rate decisively breaks above 1.3925, it would invalidate this cautious outlook and suggest that the US dollar’s rebound is back on course. Such a rise would likely prompt traders to close bearish positions and consider buying call options, with the next target being the psychologically significant 1.4000 level. Create your live VT Markets account and start trading now.

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