Title: Canadian Dollar Faces Uncertain Path as USD/CAD Struggles Below Resistance Levels
Original Author: Matt Weller, CFA, CMT (Source: Forex.com, “Canadian Dollar Short-Term Outlook: USD/CAD Coils Below Key Resistance – 7/15/2025”)
The Canadian dollar is navigating a complex macroeconomic environment marked by diverging monetary policies between the Bank of Canada (BoC) and the Federal Reserve. The USD/CAD currency pair has spent several sessions fluctuating near a critical resistance zone, and traders are watching closely for technical and fundamental cues that could determine its next major move.
This article explores the current short-term dynamics driving the USD/CAD exchange rate, identifies key technical levels to monitor, and discusses the broader economic backdrop impacting the loonie (CAD) and the U.S. dollar (USD). We draw largely from the analysis by Matt Weller at Forex.com and supplement it with insights from additional reliable sources to provide a rounded outlook.
USD/CAD Overview: A Battle Below Resistance
The exchange rate between the U.S. dollar and the Canadian dollar (USD/CAD) has hovered just below a key resistance level around the 1.3650 mark. This area was previously tested in May and again in July 2025 without a decisive breakout. The repeated failure to surpass this level suggests significant selling pressure and market hesitation about the U.S. dollar’s capacity to extend gains.
Key Observations:
– The 1.3650 level has acted as a critical resistance multiple times in 2025.
– Recent attempts to breach this level have failed, keeping USD/CAD in a relatively tight trading range.
– A successful breakout above 1.3650 could open doors to test the March 2025 highs near 1.3850.
– Conversely, a rejection from this zone could lead USD/CAD back to the mid-June lows near 1.3600 or even lower.
Short-Term Technical Outlook
Understanding the technical structure of the USD/CAD pair is crucial to anticipating the currency pair’s trajectory in upcoming trading sessions. The pair has been forming a coiling pattern just beneath resistance, which typically precedes a larger directional move.
Technical Insights:
– Bullish Scenario:
– Clearance above 1.3650 (near-term resistance)
– Acceleration toward 1.3700 and then 1.3850
– Confirmation from MACD turning positive and RSI moving into overbought territory could support a sustained bullish run
– Bearish Scenario:
– Rejection below 1.3650 could push the pair back toward 1.3550
– A drop below this support may target 1.3500 and then the May low near 1.3420
– Bearish divergence on RSI may act as an early warning before a downward move
– Neutral to Wait-and-See Mode:
– If the pair continues ranging between 1.3550 and 1.3650, it might signal indecision fueled by macroeconomic crosswinds
Fundamental Drivers: Divergent Monetary Policies
At the heart of current USD/CAD dynamics lies diverging central bank policy paths. The Federal Reserve has delayed rate cuts amidst persistent inflation, whereas the Bank of Canada took the initiative to start its interest rate-cutting cycle in June 2025.
Federal Reserve (U.S.):
– Despite financial markets expecting monetary easing in 2024, the actual pace of rate cuts has been more cautious.
– June CPI data showed inflation moderating, but not enough to prompt immediate rate cuts.
– Fed Chair Jerome Powell has stated that inflation risks remain asymmetrical, indicating that the Fed is more concerned about prematurely cutting rates than about holding too long.
Bank of Canada (Canada):
– The BoC cut interest rates by 25 basis points in its June 5, 2025 meeting to 4.75%, signaling the start of its easing cycle.
Read more on USD/CAD trading.