**USD/CAD Struggles to Maintain Momentum Below 1.3800 Amid Lack of Bullish Catalysts**
*Based on content originally reported by FXStreet.*
The USD/CAD currency pair remained constrained below the psychological resistance level of 1.3800 during Monday’s trading session as it continued to trade in a narrow range. Despite earlier bullish momentum in recent weeks, the pair has found it difficult to extend higher primarily due to a lack of fresh catalysts and mixed risk sentiment in the broader markets. While the US economy has released relatively strong data recently, the Canadian dollar — also known as the “loonie” — has failed to capture meaningful strength, weighed down by soft commodity prices and cautious sentiment around interest rate trajectories in both countries.
This article presents a deep dive into the recent price action and technical setup of USD/CAD, underlying macroeconomic fundamentals, key factors shaping the pair’s outlook, and expectations for short- to medium-term movement.
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**USD/CAD Stays Capped Below 1.3800: A Recap of Recent Price Action**
– USD/CAD traded with mild gains for much of Monday’s European and North American trading sessions but failed to overcome the resistance near 1.3800.
– The pair continues to consolidate after climbing in previous weeks, having gained ground from early August when it traded below 1.3400.
– Intraday weakness in oil prices and concerns over China’s economic health weighed on the Canadian dollar, but an improved risk tone capped strong upside in USD.
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**Market Sentiment Remains Mixed**
While the greenback has benefited from a safe-haven bid amid increasing global macroeconomic uncertainty, its upside has been somewhat checked by improving risk sentiment in equity markets. Wall Street stocks posted mild gains during the latest session, reflecting relatively positive investor sentiment. This has dulled USD demand to some extent, making it harder for USD/CAD to decisively push above the 1.3800 barrier.
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**Fundamental Drivers Behind the USD/CAD Movement**
1. **US Dollar Supportive Factors:**
– Recent US data releases such as retail sales, industrial production, and jobless claims have pointed to a resilient economy.
– Consumer confidence and inflation readings have lifted expectations that the Federal Reserve may keep rates elevated for longer than initially anticipated.
– Hawkish remarks from several Fed officials have reinforced the view that future rate hikes are not entirely off the table, keeping yields near multi-month highs.
– The US Treasury 10-year note yield hovered near the 4.30% level, offering ongoing support to the USD across the board.
2. **Canadian Dollar-Specific Weaknesses:**
– The Canadian economy has shown signs of slowing, with GDP growth stagnating and job gains missing expectations.
– Inflation in Canada remains a concern, although recent data showed a less aggressive rise in prices compared to earlier months. The Bank of Canada (BoC) recently chose to hold its policy rate at 5.00% amid concerns that higher borrowing costs are weighing on growth.
– Falling oil prices — Canada’s largest export — have limited support for CAD. West Texas Intermediate (WTI) crude lost ground, trading below the $83/barrel mark, which in turn pressured the loonie.
– With the BoC signaling a prolonged pause, there is a divergence emerging between Fed and BoC policy expectations, strengthening USD/CAD.
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**Technical Analysis: USD/CAD Faces Key Resistance Zone**
Technical charts show the USD/CAD pair experiencing strong overhead resistance near the 1.3785 to 1.3800 region:
– The 1.3800 level has historically been a tough barrier to break, acting as psychological as well as structural resistance.
– A daily close above 1.3800 is needed for bulls to target the next level near 1.3855 and then 1.3900 where previous higher highs were established.
– On the
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