USDCAD roared into 2026, mounting a robust rally that clawed back almost all of its December's losses. Yet, this bullish charge hit a wall of the 1.39–1.393 resistance, causing momentum to falter and buyers to lose their grip on the market. The retreat was swift, with the pair falling back to the 1.386 support by Monday's close and extending losses in order to pierce the 38.2% Fibonacci retracement at 1.382 yesterday. After two days of concentrated selling, the decline may slow. However, USDCAD now has its sights set on deeper Fibonacci support at 1.3785 (50%) and 1.375 (61.8%) as new bearish targets.
On the daily chart, the technical picture has tilted. Breaking below the 50-period moving average signals a cooling buying appetite, while the retreat of the Relative Strength Index (RSI) from overbought territory reinforces the case for opening short positions. The last comparable warning emerged in mid-October, foreshadowing a drop from 1.406 to 1.389 over the following fortnight.
From a geopolitical standpoint, renewed tensions over Greenland have reignited the anti-dollar sentiment that dominated the first half of 2025, thus pressuring the greenback across the board. Notably, Reuters data shows speculative USD shorts are still well below the highs seen in June and July 2025. This suggests the current move is less about speculative frenzy and more about steady repositioning—which may lend it staying power.
On the loonie's side, the landscape remains largely unchanged. The country's rate-cutting cycle appears to be over, especially after December's local inflation surge. Although the upcoming Federal Reserve (Fed) and Bank of Canada (BoC) meetings on January 28 could inject market volatility, they are unlikely to outweigh the dominant geopolitical narrative. To enter the sell deal with greater clarity, wait for the pair to close below 1.382. Otherwise, taking action before the time is ripe could prompt a recovery toward the previously-broken 1.386 threshold.
The following plan may come into play for your trading:
Sell USDCAD at or below 1.382. Place Take profit 1 at 1.3785 and Take profit 2 at 1.375. Set Stop loss at 1.386.
This content is for informational purposes only and is not intended to be investing advice.
