Title: USD/CAD Attempts to Recover from Recent Losses: Technical and Fundamental Insights
Source: Adapted and expanded from an analysis originally published on Economies.com by Mahmoud Amer
Date of Original Analysis: September 17, 2025
The USD/CAD currency pair is currently undergoing a technical correction, seeking to recover from recent bearish pressure that has driven the pair to lower levels in the forex markets. This comes amid a backdrop of shifting macroeconomic sentiment, evolving central bank policy outlooks, and a volatile oil market. This article delves into the current market dynamics surrounding the USD/CAD pair, offering a deepened analysis based on the original article by economist Mahmoud Amer, as well as updated insights from various financial sources.
Overview of Recent Price Movements
USD/CAD has seen a turbulent trading period in recent weeks, with the pair falling from key resistance levels as the US dollar softened and the Canadian dollar gained ground on stronger crude oil prices. As of mid-September 2025:
– USD/CAD attempted to rebound after finding support near the 1.3500 level.
– The 50-period exponential moving average (EMA) on the 4-hour chart acted as short-term support, preventing further losses in the immediate term.
– The pair had been under persistent pressure due to dovish expectations from the Federal Reserve and improving Canadian economic data.
The latest price rebound attempt is being interpreted as a technical bounce rather than a trend reversal. To determine how sustainable this move is, one must evaluate various technical indicators and fundamental factors affecting both the US and Canadian economies.
Technical Analysis
At the time of writing, USD/CAD is showing signs of attempting a short-term correction. Here are the key technical takeaways:
Support and Resistance Levels
– Immediate Support: 1.3500 has emerged as a minor floor, aligning with psychological significance and previous price consolidation.
– Major Support: 1.3440 is being watched by traders as a key level where renewed buying interest could re-emerge if bearish momentum picks up pace again.
– Short-Term Resistance: The level at 1.3590 coincides with the 50-day moving average and marks the key resistance zone that must break for bulls to gain more confidence.
– Next Resistance Target: Should the pair clear 1.3590 decisively, the next bullish target emerges near 1.3665.
Moving Averages Outlook
– The 50-day EMA is currently restrictive and serving as dynamic resistance.
– A bearish crossover of the 50-day and 200-day EMAs earlier this month continues to exert downward pressure on the broader trend.
Momentum Indicators
– The Relative Strength Index (RSI) saw a mild recovery from oversold levels, now fluctuating around the 45–50 region, suggesting neither buyers nor sellers have the upper hand.
– MACD histogram has started to show decrease in downward momentum, indicating a possible sideways consolidation in the near term.
Chart Patterns
– Price action shows a descending channel formation over the past few weeks.
– The pair is now testing the upper band of the channel, and a successful break could trigger a more sustained rebound, but a failure here could affirm continued bearish sentiment.
Fundamental Drivers: US Dollar Side
Federal Reserve Outlook
The Federal Reserve’s policy direction is critical for USD/CAD, and the recent guidance suggests a potential pause or even rate cuts in 2026. This has put pressure on the US dollar broadly.
– Fed officials have hinted that the interest rate cycle may have peaked, with inflation moderating closer to the 2% target.
– Economic activity, as measured by U.S. GDP, has remained resilient but is showing signs of deceleration.
– Markets are pricing in a 60% likelihood of a rate cut by Q2 2026, according to CME Group’s FedWatch Tool.
US Economic Indicators
– The Consumer Price Index (CPI) for August came in at a 3.2
Read more on USD/CAD trading.