**USD/CAD Analysis: Positive Momentum Wanes Amid Technical and Fundamental Pressures**
*Based on the original analysis by Economies.com (August 6, 2025)*
The recent performance of the USD/CAD pair reflects a series of technical and fundamental developments that suggest a loss of bullish momentum, pointing toward a potential downside movement in the near term. This article updates and expands upon the original analysis published by Economies.com on August 6, 2025, detailing the currency pair’s recent behavior, forecasting short-term expectations, and contextualizing the movement within broader economic trends. The original analysis, titled “The USD/CAD Exhausted Its Positive Opportunities – Analysis – 06-08-2025,” provides the basis for this extended examination.
## Recent Technical Overview
The USD/CAD currency pair had shown a modest bullish push lately, climbing above the 1.3400 level in early August. However, this upward movement was short-lived. According to the original report by Economies.com, this bullish move failed to breach significant resistance zones and was followed by a retracement, placing the pair under increased selling pressure.
### Key Technical Indicators
– **Resistance Level**: USD/CAD faced strong resistance around 1.3425–1.3440. It failed to sustain its breakout and reversed below this level, signaling a weakening bullish trend.
– **Support Level**: The pair hovers around its support zone of 1.3360–1.3370, an area that must hold to prevent further downside.
– **Moving Averages**: The 50-day and 100-day exponential moving averages are showing divergence, with price action currently below both averages, suggesting a bearish bias.
– **Stochastic Oscillator**: The stochastic oscillator is moving away from overbought territory, indicating a likely continuation of the downward trend. The loss of buyer interest at higher levels supports this view.
– **MACD Indicator**: The Moving Average Convergence Divergence (MACD) shows declining histograms with a signal line crossover, reinforcing bearish sentiment.
The technical failure to maintain gains beyond 1.3425 points toward a classic bull trap, where buyers entered expecting a breakout but were quickly invalidated by stronger selling pressure. As a result, the path of least resistance for USD/CAD appears to be skimming lower levels unless a fresh catalyst emerges.
## Fundamental Backdrop
While technical charts provide clues, macroeconomic fundamentals serve as the bedrock for trend sustainability. Both the US dollar and the Canadian dollar are influenced heavily by monetary policy direction, commodity prices, and economic data flows.
### US Dollar Drivers
– **Federal Reserve Policy Outlook**: Expectations around Federal Reserve monetary tightening have moderated after the June and July FOMC meetings, where Powell emphasized a data-dependent strategy. Market participants are assessing incoming inflation data to determine the scale and timing of potential rate cuts in the final quarter of 2025.
– **US Economic Indicators**: Key metrics including the July Non-Farm Payrolls report, which showed a larger-than-expected drop in employment gains, and weaker ISM Services data point to slowing momentum in the US economy. This dampens the dollar’s attractiveness to yield-seeking investors.
– **Treasury Yields**: US Treasury yields have softened slightly, eroding support for the USD across most G10 currencies.
### Canadian Dollar Catalysts
– **Oil Prices**: Given Canada’s commodity-centric economy, particularly crude oil exports, the Canadian dollar often moves in tandem with oil prices. In early August, WTI crude oil prices hovered near $81 per barrel, lending marginal support to the loonie.
– **Bank of Canada (BoC) Outlook**: Unlike the Fed, the Bank of Canada appears slightly less dovish, having signaled it may pause further rate cuts to assess inflation stability after inflation ticked up to 3.2 percent in Q2 2025.
– **Economic Performance
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