**USD/CAD Price Forecast: Bearish Momentum Below 1.3640 Suggests Deeper Decline**
*By FXStreet Staff Writer as featured in the original article. Expanded and supplemented by additional forex insights.*
The USD/CAD currency pair is under increased selling pressure as it continues trending downward below the critical resistance level of 1.3640. After breaking down through this key technical zone, bearish forces have gained strength, signaling that further losses may unfold in the near term. We explore the current market positioning, technical and fundamental drivers, and potential price levels to watch as the pair continues its downward trajectory.
This analysis is based on the original work published by FXStreet and integrates additional forex analysis and current macroeconomic data to provide a comprehensive update on USD/CAD movements.
## USD/CAD Market Overview
The US dollar has been facing headwinds amid shifting expectations regarding the Federal Reserve’s monetary policy in 2024. In contrast, the Canadian dollar has recently found modest support from stable oil prices and steady economic performance. This divergence has been reflected in the USD/CAD pair, with sellers taking control following a failed attempt to hold above the 1.3640 resistance level.
As of the current session, USD/CAD is trading close to 1.3270, significantly below recent highs around 1.3730 seen earlier in December 2023. The breakdown from 1.3640, a key support-turned-resistance level, indicates that bearish sentiment is increasing following a broadly weaker US dollar and more robust Canadian economic data.
## Technical Analysis of USD/CAD
The technical setup for USD/CAD suggests persistent downward momentum with sellers responding to resistance zones and macro drivers. The failure to sustain levels above 1.3640 has shifted the short-term bias firmly to the downside.
### Key Technical Observations:
– **Bearish Structure:** The daily chart shows a series of lower highs and lower lows forming since early November 2023, confirming a short-term bearish trend.
– **Break Below Uptrend Support:** A key uptrend line extending from the October swing low around 1.3570 was decisively broken in mid-December, fueling additional selling momentum.
– **50-Day Moving Average Breach:** The pair has now decisively fallen below its 50-day moving average, commonly viewed by traders as a medium-term trend signal.
– **Momentum Indicators:** The RSI (Relative Strength Index) has declined below the 50 level, suggesting that bearish momentum is strengthening. Similarly, MACD (Moving Average Convergence Divergence) has turned negative, reinforcing the bearish case.
– **Immediate Support Levels:** Analysts point to support at:
– 1.3600: Recently tested but failed.
– 1.3570: A minor support from November.
– 1.3500: A psychological level with historical price reaction.
– 1.3400-1.3420: A more significant horizontal support zone.
– **Resistance Zones to Monitor:**
– 1.3640: Now the key resistance.
– 1.3690: An upper trendline area from previous highs.
– 1.3740 to 1.3780: Multi-week resistance zone where the price has repeatedly been rejected.
## Fundamental Drivers of USD/CAD Price Action
Both Canadian and US fundamentals are playing central roles in shaping the near-term outlook of this currency pair.
### USD Weakness Mainly Driven by Fed Policy Expectations
– **Federal Reserve Dovish Tilt:** The Fed has adopted a more dovish tone entering 2024, suggesting rate pauses and eventual policy easing by midyear if inflation continues to moderate. This change in tone has hurt the US dollar, which had previously benefitted from one of the most aggressive interest rate hiking cycles in decades.
– **US Treasury Yield Decline:** Falling US bond yields have removed some support for the greenback. The benchmark 10-year
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