USD/CAD approaches 1.4000 as bearish loonie bets hit yearly high

USD/CAD climbed to near 1.3950 on June 8, approaching its 2026 high after a 3 percent recovery from May lows.

Speculators raised net short positions on the Canadian dollar to the highest level this year, Commodity Futures Trading Commission data show, reflecting growing conviction that the loonie's weakness will persist.

The pair has rallied from session lows near 1.3550 in May, recovering more than 3 percent as the US dollar strengthened against most major currencies. The 14-day relative strength index has moved into overbought territory above 70, suggesting the rally may be overextended, though momentum indicators have not yet flashed reversal signals.

A sustained break above the 2026 high would mark the loonie's weakest level against the greenback in more than a year, with implications for US-Canada trade flows. The next major resistance sits at 1.4000, a psychological barrier not tested since 2020. On the downside, support at 1.3800 would need to hold to keep the bullish structure intact.

The Canadian dollar's weakness comes as the Bank of Canada faces a more challenging inflation outlook than the Federal Reserve, with markets pricing a higher probability of BoC rate cuts in the second half of 2026. Canada's heavy reliance on commodity exports has also weighed on the currency, with West Texas Intermediate crude oil trading near $72 per barrel, down from April highs above $80.

The US dollar index, which measures the greenback against a basket of six major currencies, has strengthened 4 percent year-to-date, adding to headwinds for the loonie and other commodity-linked currencies. A USD/CAD breakout above the yearly high would reinforce the broader dollar strength narrative and could trigger further short-covering in related FX pairs.

This article is for informational purposes only and does not constitute investment advice.