Title: USD/CAD Continues Upward Momentum Amidst Market Rebalancing
Source: Based on insights from an article originally published on Economies.com, “The USDCAD is Recovering – Analysis – 12-09-2025”
The USD/CAD currency pair is showing signs of recovery, with bullish momentum gaining strength in recent sessions. The latest developments in the forex market suggest an upward trajectory for the US dollar against the Canadian dollar, spurred by technical and fundamental signals. Traders are closely monitoring key resistance levels and economic indicators from both countries as they gauge the next move for this North American currency pair.
This detailed analysis explores the technical, macroeconomic, and geopolitical drivers influencing USD/CAD as of September 2025, based on the article from Economies.com, along with supplemental data from the Bank of Canada (BoC), US Federal Reserve reports, and wider market commentary.
Technical Overview of USD/CAD
The USD/CAD forex pair started showing signs of a bullish reversal as of mid-September 2025. The technical chart pattern indicates the pair is attempting to recover after a short period of correction. From both a short-term and medium-term perspective, traders should take note of the following key developments:
– The pair has successfully rebounded from a recent support level near 1.3580, initiating an upward push.
– Current price action suggests the pair is attempting to test the resistance around the 1.3660 level.
– A daily close above 1.3660 would imply a continuation of the upward trend, potentially targeting further resistance areas near 1.3735 and 1.3800.
– The Relative Strength Index (RSI) indicator remains above 50, a neutral-to-bullish signal, supporting the breakout scenario.
– Moving averages (20-day and 50-day EMA) are showing signs of a bullish crossover, aligning with recovery expectations.
Short-Term Outlook
The prevailing trend is still characterized as positive unless the price drops below the support threshold of 1.3570. If bulls maintain their upper hand, the logical targets in the near term include:
– 1.3735: A key level that has acted as resistance over the past two months.
– 1.3800: A psychological resistance area and technical ceiling where selling pressure could resume.
These levels serve as key reference points for both breakout and reversal traders.
USD Fundamentals: Economic Strength Bolstering the Dollar
The US dollar has maintained resilience across various forex pairs, including USD/CAD. Several macroeconomic factors are contributing to the USD’s strength, such as:
1. US Inflation and Fed Responses:
– The Federal Reserve has remained data-dependent throughout 2025, leaving the door open for future rate hikes if inflation persists.
– August’s Consumer Price Index (CPI) data indicated a year-on-year rise of 3.4%, prompting speculation about another possible interest rate increase in Q4 2025.
2. Labor Market Robustness:
– The August non-farm payroll report exceeded estimates, with 245,000 new jobs added.
– The unemployment rate remains low at 3.6%, above pre-pandemic levels but indicative of a strong labor market.
– Average hourly earnings continue rising, which adds upward pressure on inflation.
3. US Retail Sales and Consumption:
– Consumer spending has remained resilient, growing at an annualized rate of 2.1% in Q3 2025.
– Retail sales in July and August showed consistent month-over-month increases, suggesting steady economic activity.
These conditions reinforce the US dollar’s performance against major peers, especially when paired with commodity-linked currencies such as the Canadian dollar.
CAD Fundamentals: Weaker Oil Prices and Dovish BoC Outlook
The Canadian dollar, in contrast, has endured increased pressure due to a combination of softening oil prices and cautious policy signals from the Bank of Canada.
1. Oil Prices and Canadian Economy:
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