The Canadian dollar is navigating a mix of renewed technical momentum and persistent trade-policy headlines, with USD/CAD traders eyeing a move toward 1.3900 as the Relative Strength Index recovers from oversold conditions.
According to technical analysis, the daily RSI has rebounded from below 30, suggesting selling pressure may be easing and allowing buyers to regain control. Immediate resistance is seen at 1.3900, followed by 1.4000, while support sits near 1.3800 and then 1.3750. A decisive break above 1.3900 could open the door to a test of the 1.4000 handle, while failure to hold above 1.3800 could negate the bullish bias and trigger a retest of lower supports.
Fundamental drivers include crude oil prices, as Canada is a major oil exporter, and the monetary policy divergence between the Federal Reserve and the Bank of Canada. The Fed has signaled a slower pace of rate cuts while the BoC has already begun easing, widening the interest rate differential in favor of the U.S. dollar. Upcoming U.S. inflation figures and Canadian employment data could provide further direction.
Scotiabank strategists added that tariff headlines continue to create short-term volatility, but the pair has not broken out of its recent band. They cite a well-defined range between roughly 1.3500 and 1.3700, with resistance near 1.3700 and support around 1.3500. Scotiabank warned that only a clear break above or below those levels would signal a new directional move, while markets have largely priced in the current tariff environment.
Traders should remain cautious, as the pair may still be range-bound and false breakouts are possible. Risk management, including stop-loss orders below key support, remains essential in this environment.
