The USD/CAD is currently trading around 1.3570 and may drop to 1.3539, its lowest point since October 2024. The 14-day Relative Strength Index (RSI) sits at 26, suggesting it’s oversold, with strong selling pressure. The main resistance levels to watch are the nine-day EMA at 1.3716 and the 50-day EMA at 1.3818.

Technical Analysis Overview

Technical analysis shows that USD/CAD is below both the nine-day and 50-day EMAs, reflecting a bearish trend. The short-term average is below the medium-term average, which signals potential downside risks. While the RSI could rise above 30, hinting at a pause in selling, the current momentum is still weak below this level. Support for USD/CAD is at 1.3539, its lowest in over a year, with further declines potentially reaching 1.3419, the lowest since February 2024. On the other hand, if the pair surpasses the key resistance levels of 1.3716 and 1.3818, it could indicate a bullish trend, potentially targeting a seven-week high of 1.3928, last seen on January 16. These insights highlight the market dynamics affecting USD/CAD, reflecting current forex trends. Today, the USD/CAD market looks very different compared to this time last year. In January 2025, the pair fell to 15-month lows around 1.3550, showcasing a strong Canadian dollar. Today, it trades higher, around 1.3850. In early 2025, the 14-day RSI was notably oversold at 26, signaling heavy selling and a possible rebound. Currently, the RSI is about 55, indicating a more neutral to bullish trend, suggesting dips could be seen as buying opportunities rather than a return to a downtrend.

Economic and Market Conditions

This shift is backed by recent economic data showing a divergence between the two economies. The latest US Consumer Price Index indicates inflation at a stubborn 3.5%, while Canada’s latest jobs report showed a surprise loss of 5,000 jobs. This economic backdrop supports the US dollar against the Canadian dollar. Additionally, we need to consider the recent weakness in the energy sector, crucial for the Canadian economy. WTI crude oil prices have dropped below $75 a barrel, down from nearly $85 last year, putting extra pressure on the loonie. This factor was less prominent during the Canadian dollar’s strength in late 2024 and early 2025. In this context, derivative traders should explore strategies that could benefit from a gradual increase in the USD/CAD exchange rate. Buying call options or using bull call spreads might provide upward exposure if the pair approaches the 1.3900 psychological level. These positions allow traders to take advantage of rising momentum while managing their risk. A key level to monitor is 1.3716, which served as primary resistance during declines in early 2025. If the market can hold this level as new support, it would strengthen the bullish outlook. However, a clear break below this level may indicate a shift in market sentiment. Create your live VT Markets account and start trading now.

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