Title: USD/CAD Breaks Key Correctional Trend Line: What This Could Mean for Traders
Original Source: The following article is based on the July 22, 2025 USD/CAD analysis by Economies.com. Additional information has been added from related market research and forex data to provide a comprehensive overview.
The USD/CAD currency pair is showing renewed bullish signals as it breaks above a significant correctional trend line. This technical milestone suggests potential for further upward movement in the U.S. dollar against the Canadian dollar in the near term.
Forex traders following this pair closely now view the break above this trend line as a critical moment that could shape price trajectories for the remainder of the month and perhaps into August. This report will dive into key technical and fundamental factors driving USD/CAD performance, chart patterns, economic indicators, and potential trade setups.
Key Technical Development: Bullish Breakout
According to the July 22, 2025 analysis by Economies.com:
– The USD/CAD pair succeeded in breaching the bearish correctional trend line that was previously limiting upside momentum.
– This break is considered a bullish signal, supported by follow-through price action and a moderately increasing trading volume.
– The breach opens the door for a continuation of the upward trend, with next key resistance levels expected at 1.3850 and then at the psychological barrier of 1.3900.
Technical Chart Patterns
A closer analysis of the H4 and Daily timeframes reveals:
– The pair had been trading under a descending channel since mid-June 2025, forming lower highs and lower lows.
– Buyers managed to lift the currency pair from a base zone at approximately 1.3600, initiating a bullish breakout.
– The latest breakout invalidates the descending pattern, favoring buyers in the medium term.
Current price behavior shows positive alignment between price and volume, with candlesticks closing higher following the breakout session. This signals market confidence among buyers.
The direction remains bullish as long as USD/CAD holds above key support near 1.3700. A failure to stay above this area could see the pair retest older support near 1.3620 or 1.3580.
Momentum Indicators
Technical oscillators and trend-following indicators are aligning with the bullish scenario:
– Relative Strength Index (RSI) is currently at 61 on the four-hour chart, indicating room for further moves without showing signs of overbought conditions.
– Moving Averages: USD/CAD is trading above both the 50-period and 200-period Simple Moving Averages (SMA), which supports the upward outlook.
– MACD (Moving Average Convergence Divergence) has flipped above the signal line and is showing a widening histogram, further confirming bullish acceleration.
Key Levels to Watch
Support and resistance zones are now becoming increasingly important in assessing trade setups:
Support Levels:
– 1.3700: Recently turned support from former resistance.
– 1.3600: Multiple bounce-point throughout July.
– 1.3520: June’s key swing low, strong buyer interest logged.
Resistance Levels:
– 1.3850: First bullish target from current breakout.
– 1.3900: Psychological barrier likely to witness seller interest.
– 1.3975: Multi-month high from February 2025.
Fundamental Drivers Behind the Move
The upward push in the USD/CAD pair is not just about technical levels. Several macroeconomic factors are contributing to the strength of the U.S. dollar and weakness in the Canadian dollar.
1. U.S. Federal Reserve Policy Outlook:
– The Federal Reserve has adopted a more hawkish tone in recent months. Inflation remains sticky, leading analysts to suggest another rate hike is on the table for September 2025.
– The U.S. economy continues to show resilience, especially in the employment and services sectors. June’s Non-Farm Payrolls exceeded expectations with 237,000 new jobs added.
Read more on USD/CAD trading.