This article is a rewritten and expanded version of the original piece, “Canadian Dollar Forecast: USD/CAD Coils Below Yearly Downtrend,” by Michael Boutros, published on Forex.com. It incorporates additional insights and data to provide a more comprehensive overview of the USD/CAD outlook.
Canadian Dollar Forecast: USD/CAD Consolidates Near Critical Resistance as Traders Eye Key Breakout
The USD/CAD currency pair has been trading in a relatively tight range in recent sessions, with price action hovering beneath a major descending trendline that has defined its movement throughout 2024. This technical posture indicates a coiling formation, often a precursor to a larger directional move. As the pair drifts below key resistance zones, attention turns to macroeconomic catalysts and technical chart signals that may unlock the next major phase for the Canadian dollar.
This technical formation, paired with broader fundamental pressures such as monetary policy divergence between the Federal Reserve and the Bank of Canada (BoC), is shaping the future path for USD/CAD. Market participants remain focused on interest rate differentials, oil prices, and upcoming economic data to infer the likely trajectory of the Canadian dollar through the remainder of the year.
USD/CAD Weekly Technical Overview
USD/CAD has maintained its position beneath its 2024 yearly downtrend, which originated in March. After failing to break above the 1.3650 area several times, the pair has consolidated below a key Fibonacci retracement level and descending channel resistance. Currently, momentum is stalling just under this resistance, reflecting risk of either a bullish breakout or renewed downside pressure.
Key Technical Resistance Levels:
– 1.3710: The March high, aligned with the 61.8% Fibonacci retracement of the 2023 decline
– 1.3685–1.3700: Zone of multiple highs acted as pivots throughout 2024
– 1.3650: A weekly closing level watched by technical traders
– Yearly downward resistance trendline: Extending from the March high, currently capping upside
Critical Technical Support Levels:
– 1.3500: Round-number psychological level with past historical significance
– 1.3440: 200-day moving average near recent swing lows
– 1.3360: 38.2% Fibonacci retracement from 2023 low to 2024 high
– 1.3220–1.3250: Multi-month support base
USD/CAD Daily Chart Pattern: Consolidation Beneath Long-Term Resistance
The daily chart structure reveals a continuation of sideways trade within a broader descending triangle pattern that’s been in formation since late March. The inability to break above a declining trendline resistance points to a firmness in seller conviction, especially during any attempts to rally into the 1.37 handle.
The narrowing range suggests an impending breakout. Historically, such coil patterns resolve in the direction of the broader trend — which, in this case, is currently neutral to mildly bearish on higher timeframes.
RSI (Relative Strength Index) and Momentum:
– Daily RSI is hovering around the 50 mark, neither overbought nor oversold, showcasing market indecision
– Weekly RSI has remained between 40–60, not signaling extreme conditions
USD/CAD Near-Term Outlook: Watching for the Break
Given the coiled technical pattern, USD/CAD appears poised for a breakout. The direction of this move will likely depend on external catalysts, including monetary policy announcements, economic data updates, and developments in oil markets.
Scenarios:
Bullish Breakout Triggers:
– A sustained break and close above the 1.3700–1.3710 level would invalidate the bearish trendline resistance, opening the door toward year-to-date highs near 1.3900
– A hawkish Fed stance or stronger-than-expected U.S. economic data could provide upward momentum
– Drop in crude oil prices, which typically weighs on CAD, could support the bullish case
Read more on USD/CAD trading.