USD/CAD fell for a second session and traded near 1.3710 in Asian hours on Monday. Price stayed above the nine- and 50-day Exponential Moving Averages (EMAs), suggesting a mild bullish near-term bias within a wider range. The 14-day Relative Strength Index (RSI) held in the mid-50s after rebounding from below 40. This points to firmer buying pressure without entering overbought territory.

Technical Levels And Breakout Watch

On the daily chart, the pair traded near the top of a rectangle pattern around 1.3750. A break above this area could open a move towards 1.3928, the three-month high set on 16 January. Support was seen at 1.3700, close to the nine- and 50-day EMAs at 1.3697 and 1.3696. A drop below these levels could shift focus to the lower edge of the range near 1.3540. The technical content was produced with help from an AI tool. We are watching the USD/CAD pair closely as it tests the critical 1.3700 support area. This level is significant because it aligns with both the nine- and 50-day moving averages, acting as a key pivot point for the near term. The pair’s ability to hold above this zone suggests an underlying bullish tone is still present.

Macro Drivers And Positioning

Fundamentally, the divergence between central bank policies is supporting the US dollar. Recent data showed US core inflation holding firm at 2.8% year-over-year, prompting expectations that the Federal Reserve will remain patient, while the Bank of Canada has signaled more concern about a slowing domestic economy. This policy difference continues to favor a stronger USD relative to the CAD. Adding pressure on the Canadian dollar, WTI crude oil prices have recently dipped below $80 per barrel, a drop of over 5% this month, due to concerns about global demand. As a major oil exporter, Canada’s currency is sensitive to these price shifts. This weakness in oil reinforces the potential for further USD/CAD upside. Considering the improving momentum shown by the RSI, we should consider purchasing April 2026 call options with a strike price around 1.3750. This strategy positions us for a potential breakout above the channel, targeting the January high near 1.3928. The defined risk of an options contract is prudent given the market is at a clear decision point. We saw a similar technical setup back in the fourth quarter of 2025, when the pair consolidated near its moving averages before a significant rally. That period was also marked by uncertainty around commodity prices, reminding us that these consolidations can precede strong directional moves. This historical precedent gives us added confidence in a potential upward resolution. However, risk must be managed carefully if the 1.3700 support level fails to hold. A definitive break below the moving averages would invalidate our bullish outlook. In that event, we should be prepared to quickly shift strategy and purchase put options targeting the lower channel boundary around 1.3540. Create your live VT Markets account and start trading now.

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