USDCAD finds support despite negative fundamentals

The USDCAD currency pair is currently trading near the 1.3740 level following its rebound from a local low of 1.3729. Price dynamics have recently been determined by increasing expectations of a wider monetary gap between the Bank of Canada (BoC) and the US Federal Reserve (Fed).

The loonie is now finding support in improved domestic economic conditions. Canada’s inflation reached 2.2%, which is in line with the regulator’s target. Rising export levels of crude and other goods are strengthening the trade balance. This also underpins the national currency. Nevertheless, the BoC kept rates at 2.25%, maintaining the appeal of the Canadian dollar.

Its American counterpart, on the other hand, is facing challenges due to signs of a cooling economy. November’s surge in the US unemployment rate to 4.6% and stagnant retail sales in October convinced market participants to expect further easing by the Fed in 2026. They are turning a blind eye to possible statistical distortions.

In the meantime, the situation on commodity markets adds even more support to the Canadian dollar. Escalating tensions surrounding Venezuela and new sanctions imposed by the US are propping up oil prices, the northern country’s key exports. Despite uncertain long-term prospects due to the pressing issue of a crude surplus, current geopolitical risks serve as a short-term boost.

From a technical standpoint, the USDCAD pair is in a correction after a dip to 1.3729. The Stochastic Indicator, being in oversold territory (<20) and preparing to turn up, confirms this setup. Meanwhile, the Chaikin Oscillator is telling a similar story, with waning selling pressure and increasing capital inflows. However, the overall trend remains bearish.

A weakening US dollar, dampened by widely expected Fed rate cuts, and steady Canadian economic conditions suggest a further downtrend in USDCAD after a likely short-lived correction.

Pay attention to the following trading plan:

Sell USDCAD at the current price. Set Take profit at 1.3660 and Stop loss at 1.3820.

This forecast is valid from December 17 till December 24, 2025.