The USD/CAD pair has hit resistance near the trendline at 1.4150, causing a sharp reversal. It has fallen below the rising channel and the 200-day moving average, indicating that it could decline further. A brief rebound may happen, but if the pair doesn’t rise back above the 200-day moving average around 1.3910, it could drop more. The next targets to watch are the September lows at 1.3770/1.3725 and then 1.3660. The FXStreet Insights Team, made up of journalists and analysts, gathers information from specialists. They provide insights but do not give trading or investing advice. This information is for general purposes only and should not be seen as specific investment guidance. Readers should check data independently before trading. There are risks of financial losses and emotional distress involved. After failing to overcome the resistance near 1.4150, USD/CAD has experienced a significant pullback. The pair has now slipped below its 200-day moving average, which is an important signal for traders. This suggests that the recent uptrend has lost steam, and a bigger correction may be starting. The Federal Reserve is likely to cut rates this week, especially since last week’s US CPI showed inflation dropping to 2.9%. In contrast, the Bank of Canada is expected to maintain steady rates, aided by a surprisingly strong Canadian jobs report that added 45,000 jobs in November. This growing gap in policy favors the Canadian dollar over the US dollar. For derivative traders, this situation suggests strategies that profit from a declining USD/CAD. We recommend buying put options with strike prices near the September lows of 1.3770, as we anticipate the pair will test these levels in the coming weeks. If the pair cannot rise above 1.3910, it would strengthen this bearish outlook. This situation mirrors what we saw in 2023 when the Bank of Canada paused its rate hikes before the Fed, leading to a stronger loonie. Additionally, the overall weakness in the US dollar, which has caused EUR/USD to approach 1.1650, further supports our view. This isn’t just a story about the CAD; it’s also about a weak dollar.

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