Title: USD/CAD Extends Losses as Bearish Momentum Strengthens — Comprehensive Analysis
Original Author: Economies.com | Article Date: August 28, 2025
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Overview
The USD/CAD currency pair continued to trend lower during trading on August 28, 2025, as bearish sentiment deepened. The currency pair broke through a crucial support level, indicating that downside risks have increased and that traders may see further declines in the near term. The pair’s recent performance reflects broader macroeconomic variables, including oil price trends, central banking policy divergence, and economic performance perceptions in both the U.S. and Canada.
This article offers an in-depth look at what is driving the USD/CAD pair’s latest movements, key technical indicators, macroeconomic factors influencing the trend, and what to expect in upcoming sessions.
Technical Analysis: Bearish Territory Confirmed
The USD/CAD currency pair has been exhibiting strong bearish behavior, as indicated by the decline seen in recent sessions. According to the original analysis from Economies.com, the currency broke through the 1.3530 level, which served as a major support line. This now shifts the focus toward the next downward targets.
Key Technical Observations:
– The break under 1.3530 acts as a confirmation of a bearish wave.
– The next downside targets include:
– The 1.3410 level: Serving as a near-term support zone that could offer a short pause in the downtrend.
– The 1.3350 level: A more robust technical support that aligns with previous price consolidation zones observed in June 2025.
– The price remains below the 50-day simple moving average (SMA), reinforcing downward bias.
– The Relative Strength Index (RSI) on the daily chart has slipped below 50, suggesting a growing bearish momentum without being in oversold territory yet.
– The Moving Average Convergence Divergence (MACD) indicator is producing a bearish crossover, reinforcing a negative outlook.
Short-Term Forecast:
– Momentum is favoring sellers.
– A daily close below the 1.3530 mark suggests that selling pressure is firmly intact.
– Without a significant fundamental catalyst to reverse course, the pair is likely to continue testing lower support levels.
Fundamental Drivers Affecting USD/CAD
The struggles of the USD/CAD pair are more than just technical. Several macroeconomic and geopolitical factors are contributing to the bearish movement.
1. Strength in Crude Oil Prices:
Canada is one of the world’s largest oil exporters, and the Canadian dollar (CAD) has a strong positive correlation with crude oil prices. In recent weeks, oil has posted gains amid:
– Supply disruptions due to geopolitical tensions in the Middle East.
– Reduced output from OPEC+.
– An uptick in global demand post-summer vacation season heating up refiners’ activity.
As oil strengthens, the Canadian dollar appreciates, adding downward pressure on USD/CAD.
2. Diverging Central Bank Policies:
– Bank of Canada (BoC): The BoC has maintained a relatively hawkish stance compared to the U.S. Federal Reserve. Recent minutes from BoC’s policy meeting suggest that the Canadian central bank is focused on continuing rate hikes if inflation remains sticky.
– U.S. Federal Reserve: Although the Fed kept interest rates steady in its last meeting, dovish comments by central bank officials about possible rate cuts starting in early 2026 have led to a depreciation of the U.S. dollar.
This divergence strengthens the CAD against the USD.
3. Recent Canadian Economic Data:
– Canada’s GDP: Canada’s economy grew faster than expected in Q2 of 2025, surprising analysts. This economic growth suggests a possible inflation resurgence, which could prompt further BoC action.
– Labor Market: Canadian unemployment remains historically low, and wage growth is accelerating, lending further support to CAD.
– Trade Balance: Canada’s trade surplus expanded in July, confirming demand
Read more on USD/CAD trading.