The USD/CAD exchange rate is currently around 1.3700, showing slight losses. Technical analysis suggests a potential bullish breakout, but the 14-day RSI is at 35.12, indicating weak momentum. The exchange rate remains below important moving averages and reached a new five-month low of 1.3642 on December 26. If the downward trend continues, it could drop to the lower edge of the descending wedge, targeting around 1.3550 and 1.3539. On the other hand, if it moves above the nine-day EMA at 1.3715, we could see it test the 50-day EMA at 1.3848, aiming for a recent high of 1.4014 noted earlier in December.

Currency Movements

In currency movements, the Canadian Dollar showed mixed results against major currencies. It gained 0.18% against the Japanese Yen but fell 0.17% against the US Dollar. A heat map shows percentage changes for various currency pairs, with the base currency in the left column and the quote currency in the top row. This technical analysis used an AI tool to provide accurate insights into the Forex market. The article features contributions from Akhtar Faruqui, a Forex Analyst based in New Delhi, India. As we enter the last weeks of 2025, the technical outlook for USD/CAD reveals signs of weakness, with the pair around 1.3700. The low Relative Strength Index indicates that the downtrend may have gone too far, as it tests a five-month low of 1.3642. The immediate concern is whether this support will hold or if further declines toward 1.3550 are ahead. However, the fundamental landscape changed this morning with employee reports from December 2025 in both countries. The US Non-Farm Payrolls data was stronger than expected at +210,000, surpassing the +175,000 consensus and showing ongoing wage growth. In contrast, Canada’s Labour Force Survey showed a disappointing net loss of 5,000 jobs, raising its unemployment rate to 6.3%.

Strategy Shift

This new information challenges the bearish technical outlook from late last month and suggests we should now prepare for USD strength. The differing job numbers strengthen the case for the Federal Reserve to maintain a more aggressive stance compared to the Bank of Canada. Consider buying near-term call options to take advantage of a potential sharp upward move, targeting levels above the 1.3715 resistance point. The low of 1.3642 set on December 26, 2025, now appears to be a significant support level for the pair. If it breaks decisively above the nine-day EMA at 1.3715, it would signal a trend reversal, with the 50-day EMA at 1.3848 becoming a key target. Given the new data, using put options to protect against risk below 1.3600 seems less pressing. This situation is similar to times in 2023 when diverging economic data led to swift changes in the currency pair. Additionally, with WTI crude oil prices dropping to around $77 per barrel over the holiday season, the Canadian dollar faces extra challenges. Thus, we see the risk balance shifting upward for USD/CAD in the coming weeks. Create your live VT Markets account and start trading now.

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