USD/CAD is aiming for initial resistance around 1.3970, according to technical analysis. The 14-day Relative Strength Index stands at 60, indicating bullish momentum without being overbought. Initial support is at the nine-day Exponential Moving Average (EMA) near 1.3864, followed by the 50-day EMA at 1.3853. After three days of gains, USD/CAD has slightly decreased, trading around 1.3890 during European hours. The daily chart shows an ascending channel pattern, reflecting a consistent bullish trend. The nine-day EMA is above the 50-day EMA, suggesting a strong upward bias, while the 50-day EMA is leveling off after a decline, easing downside pressure.

Testing Resistance Levels

If USD/CAD remains above the short-term averages, it could test resistance at 1.3970, followed by 1.4014. Any pullbacks may find support at the nine-day EMA of 1.3864 and the 50-day EMA at 1.3853. A drop below the moving averages could shift risk towards the lower boundary around 1.3790 and possibly reach the five-month low of 1.3642. Today, the Canadian Dollar shows minor percentage changes against major currencies, with its strongest performance against the US Dollar. Data and analysis are provided by Akhtar Faruqui, a Forex Analyst from New Delhi, India. Looking back to the end of 2025, the USD/CAD pair maintained a bullish bias within an ascending channel. The price stayed above key moving averages, suggesting that dips would be minor. This technical setup set the stage for a potential retest of the highs seen in early December 2025. As of today, January 16, 2026, the fundamental outlook supports this view. Recent U.S. inflation data came in slightly higher than expected at 3.3%, which may delay the Federal Reserve’s timeline for interest rate cuts. This difference in policy strengthens the U.S. dollar against currencies with a more cautious central bank approach.

Canadian Economy Overview

At the same time, the Canadian economy is showing signs of easing. The latest jobs report indicated an increase in the national unemployment rate to 6.2%, and WTI crude oil prices have dropped to around $75 per barrel, impacting the commodity-linked loonie. The Bank of Canada has also adopted a more cautious tone in its recent communications. In the coming weeks, we should consider strategies that take advantage of a rising USD/CAD. Buying call options with strike prices targeting the 1.4014 resistance level from December 2, 2025, could benefit from this expected upward trend. The support level identified last year around 1.3850 remains crucial for potential entry points on any pullbacks. We also need to manage the downside risk associated with this outlook. A clear break below the 50-day moving average, near 1.3853, would signal that the bullish momentum is weakening. If prices fall below the lower boundary of the ascending channel around 1.3790, we would need to hedge or exit long positions. Create your live VT Markets account and start trading now.

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