Christian Lawrence, senior market strategist at Rabobank, explains that USD/CAD pair has been range trading over the past six months which helps explain why implied volatility fell to record lows at the end of November.

"We often highlight oil and interest rate differentials as the main driver of USD/CAD. That said, in line with our expectations this has broken down as the USD continued to strengthen despite falling US rates. We expect USD/CAD to break out to the upside, but it is fair to say we have been surprised at CAD's resilience. To our mind, however, it is only a matter of time before data deteriorates and the market rep."