Although microdamage is known to accumulate in trabecular bone with overloading and aging, the tissue-level stresses and strains associated with local bone failure are not well known. Local correlation of microdamage with microstructural stresses and strains requires methods to accurately register histological sections with micro-computed tomography (micro-CT) based finite element models. In addition, the resolution of correlation (i.e., grid size) selected for analysis may affect the observed results. Therefore, an automated, repeatable, and accurate image registration algorithm was developed to determine the range of local stresses and strains associated with microdamage initiation. Using a two-dimensional rigid registration algorithm, bone structures from histology and micro-CT imaging were aligned. Once aligned, microdamaged regions were spatially correlated with local stresses and strains obtained from micro-CT based finite element analysis. Using this more sophisticated registration technique, we were able to analyze the effects of varying spatial grid resolution on local stresses and strains initiating microdamage. The results indicated that grid refinement to the individual pixel level (pixel-by-pixel method) more precisely defined the range of microdamage initiation compared to manually selected individual damaged and undamaged trabeculae. Using the pixel-by-pixel method, we confirmed that trabecular bone from younger cows sustained higher local strains prior to microdamage initiation compared to older bone.