Canadian Dollar Outlook: USD/CAD Pulls Back

USD/CAD has closely tracked broader US dollar movements in recent months, often amplifying those trends. The pair printed fresh highs in early November as DXY approached a potential breakout. That area ultimately marked a turning point.

While DXY later revisited early November resistance near the 100 level, USD/CAD failed to confirm the move, setting a clear lower high. Momentum then shifted decisively, with the pair sliding back below 1.4000. A brief attempt to reclaim the figure was firmly rejected, triggering a sharp sell-off of more than 350 pips and driving price into a six-month low formed late last month.

More recently, modest USD strength has helped USD/CAD stabilize, with buyers pushing price back toward 1.3800. That level has so far held as resistance, with sellers stepping in once again.

1.3750 Returns as a Key Inflection Zone

The 1.3750 area remains structurally important and has shaped USD/CAD price action throughout 2025. The level initially marked a May low that sparked a rally toward 1.4000, where sellers responded aggressively. After the subsequent breakdown, 1.3750 repeatedly capped price through June and July as a bullish base began to form.

That structure evolved into an ascending triangle, positioning USD/CAD as a preferred vehicle for USD strength into the second half of the year. Once the Fed began cutting rates in September, the breakout accelerated, with 1.3750 acting as firm support through multiple retests before price finally cleared 1.4000.

Near-Term Focus: Can Support Hold?

The rejection at 1.3800 has brought USD/CAD back into a familiar support test at 1.3750. For bullish scenarios, holding this level is important. The four-hour chart shows a developing rounded base, and a confirmed break above 1.3800 would expose upside levels at 1.3836, 1.3860, and the broader resistance zone near 1.3900.

Bigger Picture View

From a longer-term perspective, USD/CAD remains range-bound with a strong mean-reversion tendency. A rising trendline drawn from the 2023 lows is still intact, keeping the door open for buyers while it holds. A clean break below that structure would shift focus toward 1.3500 and potentially 1.3000, consistent with the broader range thesis.

Should US policy ultimately lean toward sustained dollar weakness, this longer-term downside scenario becomes increasingly compelling.