The USD/CAD pair, which reached a four-year high of 1.4465 at the end of 2024, is now under sustained downward pressure due to recent political developments in Canada that are bolstering CAD futures.

In Q4 2024, USD/CAD experienced a significant rally, with the exchange rate nearing overbought territory at its four-year peak of 1.4465. This period of strength was driven by a well-established upward trendline. However, by late December, the bullish momentum stalled, and the pair consolidated within the 1.4465-1.4340 range for 10 trading sessions, signaling reduced volatility as 2025 began.

On January 6, USD/CAD tumbled more than 1%, breaking below the 1.4340 support level. This sharp decline coincided with a rise in Canadian futures, likely spurred by news that Prime Minister Justin Trudeau announced his resignation as leader of the Liberal Party. The political shift, further compounded by the December departure of Finance Minister Chrystia Freeland, has fueled optimism about stronger economic prospects under a potential Conservative government. Conservatives, leading in recent polls, are viewed as better equipped to tackle issues like stagnant per capita growth and immigration challenges.