USDCAD trades near 1.3865, pressing into resistance at 1.3809–1.3878. A clean breakout could extend gains toward 1.4014, while initial support rests at 1.3750–1.3720. A drop below this zone may trigger a deeper retracement toward 1.3538. Overall momentum leans modestly bullish but is sensitive to oil and USD moves.
Fundamental Factors Affecting USDCAD
- Inflation Cooling: Canada’s July CPI dropped to 1.7% (from 1.9%), with core easing to 2.4%, raising BoC rate-cut bets—39% in September and 70% in October (Reuters).
- Commodities Drag: Softer oil prices ($62–$63/bbl) weigh on the CAD, as do lower 10-year yields (~3.44%).
- Monetary Divergence: A dovish BoC outlook contrasts with still-cautious Fed policy, reinforcing CAD weakness in the short run.
1. Canadian inflation slump & BoC easing bets
The Loonie weakened as July inflation fell to 1.7% (from 1.9%), and core inflation eased sharply to 2.4%, boosting Canadian rate-cut expectations for September to 39%, and 70% for October. Lower oil prices (now around $62–$63/bbl) and cooling bond yields (10-year at ~3.44%) further weakened CAD.
2. Technical levels in focus
USDCAD is hovering near 1.3865, testing initial resistance. Key support lies at 1.3750–1.3720, with resistance around 1.3809–1.3878. A decisive break above this zone may open a move toward 1.4014, while a slip below support could target 1.3538.
3. Risk dynamics & broader outlook
A weakening USD could clamp upside, but for now, USDCAD is biased modestly bullish amid dovish BoC expectations. The 2025 outlook sees USDCAD holding around 1.38–1.40 as central bank policy divergence remains a key driver.
Summary
USDCAD trades near 1.3865 amid Canadian disinflation and oil-driven Loonie weakness. A clean break above 1.3878 may signal further strength toward 1.40, while a drop below 1.3720 risks deeper retracement. Watch for upcoming Canadian inflation prints and BoC commentary as catalysts.
USDCAD D1 Timeframe
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On this USDCAD Daily chart:
Price has decreased since March, respecting the descending trendline (black). Each rally into the trendline and surrounding supply zones has been rejected heavily. Prices have been pushing upward recently, but they are approaching a strong confluence zone around 1.3990 – 1.4050.
This zone is critical because:
- It aligns with the descending trendline.
- Multiple horizontal resistance levels cluster here (1.3929, 1.3972, 1.4015, 1.4053).
- The 200-day moving average also acts as dynamic resistance in this region.
The black arrow projection shows a bearish rejection expected from this zone, with sellers likely to step back in. If rejection holds, price could resume its downtrend toward 1.3700 – 1.3600 in the coming weeks.
Key technical highlights:
- Strong descending trendline intact since Q1 2025.
- The current move upward looks corrective, not impulsive.
- Heavy resistance cluster around 1.3990 – 1.4050.
- Next downside targets: 1.3740, then 1.3600.
Direction: Bearish
Target- 1.37783
Invalidation- 1.41156
CONCLUSION
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