**USD/CAD Price Forecast: Bullish Momentum Builds Toward 1.4000 as Bulls Eye Break Above 200-Day SMA**
*Original report by Haresh Menghani, FXStreet. Additional data and context integrated for expanded analysis.*
The US dollar (USD) continues to display resilience against the Canadian dollar (CAD), with the USD/CAD currency pair showing consistent upward traction. The pair’s bullish movement is gaining steam as it approaches a key technical milestone — the 200-day Simple Moving Average (SMA) — around the 1.4000 level. Having recently hit a multi-month high, market participants and technical analysts are increasingly optimistic that a breakout above this level may be imminent.
We explore the key drivers behind USD/CAD’s recent movement, the near-term technical outlook, macroeconomic fundamentals influencing sentiment, and potential scenarios for traders and investors going forward.
## Key Takeaways
– USD/CAD remains firmly supported near the 1.3700 mark, rebounding swiftly from minor dips.
– Rising US bond yields and hawkish expectations from the Federal Reserve bolster USD strength.
– Weaker oil prices hurt the Canadian dollar’s standing, compounding the pair’s upward bias.
– Technical indicators suggest the momentum remains positive, favoring a retest of the 1.4000 barrier.
– Market attention now turns to key economic data from both Canada and the United States that could influence near-term moves.
## Technical Outlook: USD/CAD Maintains Bullish Posture
The USD/CAD pair retains its position within a well-defined upward channel that began forming in mid-July. The pair recently rose to test the upper boundaries of this channel, reflecting improved short-term and long-term sentiment in favor of the greenback.
### Key Technical Indicators
– **200-Day SMA**: Currently around the 1.3970–1.4000 zone, this level serves as a pivotal resistance. A decisive close above this mark could confirm a long-term bullish breakout.
– **RSI (Relative Strength Index)**: On the daily chart, the RSI is holding near the 60–65 range. While not yet overbought, it suggests sustained upside acceleration without immediate risk of correction.
– **MACD (Moving Average Convergence Divergence)**: The MACD line remains above the signal line, reinforcing the bullish outlook.
– **Key Resistance Levels**:
– Immediate resistance lies around 1.3890–1.3920.
– A sustained break of the psychological 1.4000 level could open pathways toward the March 2023 highs near 1.4200.
– **Support Levels**:
– The 1.3740 zone has repeatedly acted as a floor, offering buyers re-entry opportunities.
– If bearish pressures intensify, look for deeper support near 1.3660 and then the 50-day SMA, currently around 1.3600.
## Fundamental Analysis: Yield Differentials and Oil Prices Drive the Narrative
### US Dollar Strength Backed by Rates and Economic Data
Several macroeconomic elements are working in the favor of the USD:
– **Stronger Treasury Yields**: The US 10-year Treasury yield briefly touched multi-year highs as markets continue to price in a “higher-for-longer” interest rate stance from the Federal Reserve. FOMC officials have consistently signaled that inflation remains a priority, reinforcing expectations that policy will remain tight through early 2025.
– **FOMC Rate Expectations**: As of early October 2024, CME’s FedWatch Tool indicates that markets assign a near 65% probability of at least one more rate hike before mid-2025. This divergence against the Bank of Canada’s (BoC) more dovish signals lends strength to the USD.
– **Resilient US Economic Data**:
– The ISM Manufacturing PMI recently ticked higher, reflecting underlying expansion in key industries.
– Core PCE
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