USDCAD: Massive Pullback Incoming or Final Trap?USDCAD is reacting from a major demand area at 1.3720–1.3770, which aligns with:
• the lower boundary of the yearly ascending channel;
• an institutional zone that has been defended multiple times (Q3 and early Q4);
• a daily RSI showing relative oversold conditions;
• a liquidity cluster below the October lows that has now been swept.
The rebound is technically justified, but its sustainability will largely depend on CAD structure (strong in the latest COT data) and on December seasonality, which is historically unfavorable for USDCAD.
The base case is a bullish pullback toward 1.3890–1.3930, followed by renewed downside pressure if macro sentiment continues to support the CAD.
The daily chart highlights:
• Primary trend: still bullish, but undergoing a deep corrective phase.
• Midline channel break → bearish acceleration into the demand area.
• Current price action: sharp rejection with increased relative volume at the lows (typical structural “spring”).
• The 1.3880–1.3930 zone is the first major supply: confluence between previous structure, the last breakdown area, and a psychological pre-pivot region.
Key technical levels:
Support: 1.3720 (demand), 1.3660 (extreme), 1.3570 (macro support).
Resistance: 1.3880, 1.3930, 1.4050.
Technical outlook:
As long as the price remains above 1.3720, the market favors a corrective rebound.
Below 1.3660, price opens the path toward 1.3570.
Seasonality – December
December is historically a bearish month for USDCAD, with negative readings across 20-, 15-, 10-, and 5-year datasets:
• 20-year avg: -0.0014
• 10-year avg: -0.0091
• 5-year avg: -0.0195 (significantly negative)
• Only the 2-year pattern shows a more neutral/volatile structure.
Seasonality takeaway: bearish bias, suggesting the current rebound is more likely a technical pullback rather than the start of a new trend.
COT Analysis (CAD + USD Index)
CAD – COT data (Nov 4, 2025)
• Non-Commercials increased CAD shorts aggressively (+8,288) while reducing longs (-1,180).
→ Indicates speculative CAD weakness in recent weeks.
• Commercials significantly increased CAD longs (+13,164).
→ Typical of institutions accumulating CAD at discounted prices.
Interpretation:
CAD displays a clear divergence: speculators are bearish, while commercials are increasingly bullish. This suggests a potential macro turning point where institutions anticipate medium-term CAD strength.
USD Index – COT data (Nov 4, 2025)
• Non-Commercials increased both longs (+6,038) and shorts (+5,474).
→ Polarized market.
• Commercials increased longs (+1,188).
→ Marginal support for the USD.
Macro COT conclusion:
• CAD: institutional buying pressure.
• USD: indecision and polarization.
Overall COT bias → medium-term bearish USDCAD, although consistent with a short-term corrective bounce.
Retail Sentiment
• Short: 37%
• Long: 63%
Retail positioning is clearly long.
Contrarian interpretation: downside risk remains elevated after the pullback.
Macro Context
• Oil remains volatile but structurally firm → historically CAD-supportive.
• The Fed maintains a cautious stance with potential rate cuts in 2026 → structural pressure on the USD.
• The BoC, although dovish, may delay cuts relative to the Fed → supportive for CAD in the medium term.
Probability 60% – Base Scenario
Pullback toward 1.3880–1.3930 before renewed bearish pressure.
Confirmations:
• Daily close above 1.3820
• Bullish H4 structural shift
Target: 1.3890
Extension: 1.3930
Failure level: below 1.3720.
Alternative Bearish Scenario – Probability 40%
A direct break below 1.3720 → continuation toward 1.3660 and then 1.3570 (macro level).
Confirmations:
• Pullback failure / squeeze
• H4 bullish breakout in oil
• Daily rejection on the USD Index.
USDCAD is currently rebounding within a broader corrective structure.
COT and seasonality do not support a strong bullish reversal, but short-term price action allows room for a move toward 1.39, where institutional interest will likely re-emerge to resume the broader macro bearish narrative.
Barring macro shocks, the preferred structure remains:
corrective rally → short setup at 1.3880–1.3930 → target 1.3720 and potentially 1.3660.
