The US-Canada diplomatic and economic relationship is still at its worst, with the ongoing frictions between US President Trump and Canadian PM Mark Carney. It has been a year since USD/CAD breached the 1.40 mark, primarily due to the more aggressive stance of the US on trade and tariffs.
The economic picture for Canada hadn’t helped the loonie, but after some cuts, things are looking better for the CAD, bringing the pair down.
USD/CAD had broken higher since September after months of consolidation. The 1.40 handle was consistently tested throughout the year, but has served as a magnet, with persistent economic weakness in the Canadian economy.
This phenomenon accelerated when markets received the surprise miss in the Canadian Q2 GDP, which was annualized at -1.8% in September.
Combined with correcting WTI oil prices throughout the entire year, which have a historical correlation with the CAD, the pair formed a rising channel leading to a retest of multi-month highs at 1.41407.
With cuts pricing in again for the FOMC (next meeting on December 10, 2025), the US dollar has slowed its October swift ascent, leading to the formation of a double top in the pair.
Last Friday’s GDP release corrected back much higher, showing a 2.6% annualized increase for Q3, and brought further strength to the CAD, which led to a break of the channel.
The North American pair now tests its 5-week lows, with the 8H 200-period moving average acting as support.
The US-Canada trade relationship is hitting new lows1, with no positive developments since the talks were revived in September. As long as the two politicians can’t get along, trade between the two countries will continue to be subdued.
USD/CAD 8H chart, December 1, 2025. Source: TradingView. Past performance is not indicative of future results.
Resistance levels
- Multi-month highs and double top 1.4140
- April 2025 pivotal resistance 1.41 - 1.4150
- 1.40 to 1.4050 key pivot (4H MA 50 at 1.4040)
Support levels
- 8H MA 200 as immediate support 1.39540
- Major pivot turned support 1.39
- 1.38 Major support
- Mid-2025 support zone 1.3675 to 1.37
This article is for general information purposes only, not to be considered a recommendation or financial advice. Past performance is not indicative of future results. It is not investment advice or a solution to buy or sell instruments.
Opinions are the authors; not necessarily those of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors.
Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and is not suitable for everyone. We advise you to carefully consider whether trading is appropriate for you in light of your personal circumstances. You may lose more than you invest. We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. Trading through an online platform carries additional risks. Losses can exceed deposits.
