USD/CAD in a hesitant phase: Canadian investors await new signals

During the final trading sessions of the year, the USD/CAD exchange rate pair is entering an uncertain cycle, with the Canadian dollar holding a position that is difficult to determine against the US dollar. This situation reflects a quiet market where demand has significantly decreased as major traders gradually withdraw from the game in preparation for the new year.

Macroeconomic Environment: Factors Affecting the Canada Dollar

The recent Federal Open Market Committee (FOMC) meeting revealed that the Federal Reserve maintains a cautious stance. Although it has implemented three consecutive rate cuts, policymakers are not rushing to act further. They will only consider the next move if inflation continues to cool down — this is a prerequisite condition that cannot be overlooked.

Conversely, the Bank of Canada (BoC) continues to keep an accommodative monetary policy, with interest rates at very low levels. The interest rate differential between the two countries will be a decisive factor in the foreign exchange market in 2026. As the Fed is expected to continue its actions, while the BoC’s intentions remain unclear, the Canadian dollar may face additional downward pressure.

Technical Analysis: Daily Chart Paints an Interesting Picture

On the daily timeframe, USD/CAD is trading at 1.3697 — this figure indicates that the exchange rate is below both the 50-day EMA and the 200-day EMA. Notably, the 50-day EMA has crossed below the 200-day EMA, a classic signal of a strong downtrend.

The RSI index is currently around 32, reflecting recent selling pressure but now weakening. At the same time, the Stochastic indicator has bounced from the extreme zone, suggesting that selling pressure has eased slightly. However, the fact remains that prices are still below moving averages, which supports the possibility of USD/CAD continuing to decline.

Potential Scenarios Ahead

If the price breaks above the 50-day EMA, it could open the door for a corrective rebound to test the 200-day EMA again. However, if the pair cannot break through this zone, the risk of forming a new bottom remains a plausible scenario.

The stability of the oscillators (RSI and Stochastic) in the coming days may support a short-term correction. But until the moving averages are broken, the overall market signal still leans toward the sellers. To change this outlook, USD/CAD needs a decisive breakout, not just a wavering oscillation at the end of the year.