The USD/CAD Price Declines After Reaching Target: A Comprehensive Analysis
Original source: Economies.com, June 11, 2025
Author: Economies.com Analysts
The currency pair USD/CAD experienced a noteworthy decline after successfully reaching the anticipated target set by prior technical predictions. This movement marks an important juncture for traders analyzing the upcoming direction of the pair. This extended analysis aims to explore the latest developments in the USD/CAD exchange rate, the technical indicators driving the decline, potential market influences like oil prices and central banks’ policies, and possible future scenarios for the pair.
This updated and expanded article provides a comprehensive look into the USD/CAD price movement from both a technical and fundamental standpoint.
Overview of the Situation
– The USD/CAD currency pair dropped after hitting the projected resistance zone.
– The earlier target mentioned in past technical analyses was accurately reached.
– Once this resistance was attained, the pair reversed direction and began retreating, signaling an opportunity for bearish traders.
Such price behavior is typical when buyers face resistance from key technical levels or broader macroeconomic headwinds reshuffle investor sentiment. In this case, several factors appear to have converged to encourage a sell-off in the US dollar against the Canadian dollar.
Technical Analysis
The recent price drop in USD/CAD was largely anticipated by technical analysts, including the team at Economies.com. Let’s break down the main technical indicators that contributed to this movement:
1. Resistance Reached
– The pair previously surged close to the 1.3800 level, which historically has acted as a substantial resistance barrier.
– This zone coincided with overbought conditions, as indicated by the Relative Strength Index (RSI) on the 4-hour and daily charts.
2. Preventive Pullback
– Once the resistance was hit, many traders opted to secure profits, triggering a pullback.
– The bearish candlestick patterns that formed around the resistance levels signaled a reversal, increasing sellers’ confidence.
3. Moving Averages
– The 50-period Simple Moving Average (SMA) crossed below the 20-period SMA, adding to the bearish technical tone.
– Additionally, the price failed to hold above the 200-period SMA on shorter timeframes, reinforcing downward momentum.
4. Momentum Oscillators
– RSI showed a bearish divergence, indicating weakening bullish momentum.
– The Moving Average Convergence Divergence (MACD) histogram started shrinking, signaling a potential crossover for more downward movement.
These indicators collectively suggested that the upside move had lost steam, prompting a corrective decline.
Fundamental Drivers Behind the Decline
The fundamental undercurrents influencing USD/CAD’s recent drop stem from policy expectations, economic data releases, and commodity influences. Understanding these factors is key to predicting future movements.
1. Shift in US Federal Reserve Expectations
– The Federal Reserve has indicated a more cautious stance on interest rate hikes due to a slowdown in inflation.
– Market participants interpret this as a pause in monetary tightening, which weakens the US dollar’s strength against higher-yielding currencies.
2. Strengthening Oil Prices
– Canada is one of the largest oil exporters globally, and its economy is closely tied to crude oil prices.
– As of June 2025, West Texas Intermediate (WTI) crude oil climbed above $80 per barrel, supporting the Canadian dollar.
– The correlation between CAD and oil means that rising oil prices usually give Canadian currency a bullish push.
3. Bank of Canada (BoC) Policy Outlook
– The BoC has struck a relatively hawkish tone compared to the US Fed.
– Increased chances of maintaining higher interest rates in Canada contribute to higher capital inflows, strengthening the CAD.
– The stronger economic performance, particularly in labor market and retail sales data, further added confidence to CAD bulls.
4. Trade Balance Data
– Canada recorded a better-than-expected trade
Read more on USD/CAD trading.