- The 1.40 mark is considered a key resistance barrier whose breach could spark a stronger upsurge
- Oil prices and US-Canada trade relations are at the centre of USD/CAD momentum
- The Federal Reserve's hawkish tone adds pressure on CAD as the Bank of Canada stays open to a loose monetary policy
Since late 2025, the USD/CAD pair has been trending upwards, mostly due to different policies between the U.S. and Canada, plus some shifts in their economies. But, the pair hit a snag around 1.4150 in December, and couldn’t keep the upward motion. This has meant a steady decline for the Canadian dollar, with the USD/CAD pair getting close to the 1.4000 level.
However, this level is a tough one to crack, both psychologically and technically, and it hasn’t been clearly broken in a long time. Each time the exchange rate approaches this level, it seems to stall. So, what’s going on?
The Oil and Trade Factor
It’s tough to discuss the Canadian dollar without considering oil. Historically, the two have moved together. Still, that connection has been a bit different in 2026. TD Economics data points out that even though WTI crude oil has been stuck in the mid-$50s because there’s too much supply globally, Canada’s energy business has stayed surprisingly competitive. Concerns about U.S. trade policies on Venezuelan oil have created some market noise, but the Loonie has regained some ground as Canada’s job numbers stay strong.
The Federal Reserve is being careful, while the Bank of Canada seems more open to loosening policy. This widens the interest rate gap, which favors the U.S. dollar. Also, the U.S. economy is holding up, limiting expectations for Fed cuts and supporting the dollar. Scotiabank’s outlook from November 2025 still makes sense. We need something big to happen to break through the 1.40 range, like changes in U.S. inflation or Canadian jobs data.
Will USD/CAD Break Through 1.40?
Assessing the odds, a breakthrough above 1.40 appears plausible, contingent on sustained USD momentum. Bank of America’s January 8, 2026, shift to neutral on USD/CAD, as the loonie reaches fair value, tempers optimism but leaves room for upside if US data surprises positively. It seems a decisive US jobs print could tip the scales, favoring a push beyond the barrier.
If Canadian inflation eases further or oil rebounds, this could amplify CAD strength. Most analysts at Bank of America suggest we are simply finding a new “fair value” equilibrium. Without a massive shock to oil or a surprise move from the BoC, the path to 1.40 remains blocked by a wall of cautious sellers. One must weigh these against USD resilience, but softer Fed signals could accelerate a pullback.
USD/CAD Prediction Today
The Relative Strength Index (RSI) has dropped from overbought levels (above 70) and is now around 57. The pivot is at the 50-day EMA at 1.386 and the upside will likely continue if the USD/CAD pair stays above that level. Primary resistance will likely be at 1.390, and a break past that level could open the way to test the monthly highs of 1.392. On the downside, there’s strong support at the 20-day EMA at 1.383, and a second support at 1.380.
USD/CAD daily chart with key support and resistance levels on 14 January, 2026. Created on TradingView
The 1.4000 level acts as a significant barrier to advancement. In the forex market, round numbers often become barriers because big institutional investors place large sell orders there. This creates a supply zone that needs major economic news to break through.
Policy divergences, with Fed caution versus BoC dovishness, alongside low oil prices pressuring CAD, sustain the trajectory.
Near-term gains have occurred, but a full reversal depends on trade. Analysts suggest that until the USMCA trade negotiations are settled later in 2026, the Canadian dollar will probably stay within a range of 1.36 and 1.39, rather than getting significantly stronger.