**USD/CAD Weekly Forecast and Technical Analysis**
*Original source: Action Forex (https://www.actionforex.com/technical-outlook/usdcad-outlook/614364-usd-cad-weekly-outlook-430/)*
The USD/CAD pair showed a strong recovery during the week, bouncing significantly from the prior week’s low. This rebound suggests that downside momentum may be slowing, implying that the pair could potentially be bottoming out. Several technical and fundamental factors contribute to this view, and traders are watching key resistance and support levels to determine the pair’s next direction.
This in-depth analysis revisits the outlook provided by Action Forex, supplemented with additional insights from recent market updates, central bank commentary, and global economic developments. The continuation of this rally depends on upcoming economic data, crude oil price movements, and monetary policy expectations.
## Weekly Review: Strong Rebound from Support
– USD/CAD rebounded strongly from the prior week’s low of 1.3602, closing near 1.3710.
– The bounce suggests temporary bottoming, at least in the near term.
– Price action indicates resilience at the lower end of the recent price channel.
– The immediate focus shifts to near-term resistance, which if broken, will confirm stronger upward momentum.
## Key Technical Levels
**Support Levels**
– 1.3602: Recent low and key short-term support.
– 1.3487: 100% projection of the move from 1.3897 to 1.3593, measured from 1.3845 – a critical Fibonacci-derived target.
– 1.3400: Psychological and historical chart support.
**Resistance Levels**
– 1.3798: 38.2% retracement of the decline from 1.3845 to 1.3602. Acts as the immediate resistance.
– 1.3845: Last swing high and major resistance. A break above would confirm a bullish continuation.
– 1.3897: Year-to-date high, serving as a key long-term resistance.
**Indicators and Chart Patterns**
– Weekly MACD remains in positive territory, but signal lines are narrowing, indicating weakening upward momentum over the medium term.
– RSI recovered from neutral levels, suggesting a re-establishing of bullish bias—but not firmly confirmed yet.
– Price holding above the 55-day EMA suggests ongoing bullish pressure.
– Daily chart shows a potential inverse head-and-shoulders pattern forming, which would be confirmed with a sustained break above 1.3845.
## Short to Medium-Term Outlook
Short-term technical indicators suggest USD/CAD is attempting to establish a base around 1.3600. The rebound from this level strengthens the case for a retest of 1.3800 in the coming sessions. However, the sustainability of this move hinges on several critical macroeconomic and geopolitical factors, outlined below.
## Fundamental Drivers
### 1. Divergence Between Federal Reserve and Bank of Canada (BoC)
– The June 2024 Federal Reserve meeting showed officials reluctant to cut rates in the near term, with stronger economic growth and inflation readings keeping policymakers cautious.
– Chairman Jerome Powell’s messaging reinforced the Fed’s “wait and see” stance, especially after hotter-than-expected inflation readings and strong labor market numbers.
– In contrast, the BoC began its easing cycle with a 25 basis point cut earlier in June, reflecting increasing concerns over domestic economic softness and subdued inflation expectations.
– This policy divergence increases upward pressure on USD/CAD, as capital flows favor higher-yielding U.S. assets.
### 2. Crude Oil Prices Supporting CAD
– Canada is a major oil exporter, and the Canadian dollar often correlates positively with crude prices.
– WTI crude prices hovered around $78–$80 per barrel during the week, supported by supply concerns and geopolitical tensions.
– However, oil markets remain volatile with seasonal demand fluctuations and uncertain global growth
Read more on USD/CAD trading.