**USD/CAD Poised for Further Upside Momentum: In-Depth Analysis and Outlook**
*Original analysis by Economies.com, extended by incorporating supplementary research and market insights.*
The USD/CAD currency pair has recently exhibited signs of renewed strength as it positions itself for a breakout above key resistance levels. According to an original analysis published on August 13, 2025, by Economies.com, the pair is gathering bullish momentum, benefiting from both technical progression and supportive macroeconomic dynamics. This article delves deeper into the factors behind the USD/CAD movement, including technical setups, fundamental drivers, recent Canadian and U.S. economic indicators, and market sentiment.
We aim to offer traders and investors a comprehensive view of where the currency pair might be heading in both the short and medium term.
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## Technical Overview: Building Upward Pressure
The original analysis emphasizes that the USD/CAD has been consolidating within a narrow trading channel and is now attempting to break higher. A series of higher lows and recent candlestick behavior are indicative of building bullish pressure.
### Current Technical Indicators Favoring Upside
– **Price Action:** The pair is maintaining trades above the 50-period Exponential Moving Average (EMA), which traditionally provides dynamic support in an uptrend, especially on the 4-hour and daily charts.
– **Momentum Indicators:**
– The Relative Strength Index (RSI) is hovering just below the overbought threshold, around 65-70, hinting at sustained bullish sentiment while still offering room for further upside.
– MACD histogram values remain in positive territory, with signal lines maintaining a steady upward slope.
– **Key Resistance Levels:**
– Immediate resistance is identified at 1.3540, a psychological and structural level.
– A confirmed close above 1.3540 could fuel a move toward 1.3600 and potentially 1.3660, aligning with the July price peaks.
– **Major Support Levels:**
– Initial support lies near 1.3450, where recent pullbacks have paused.
– Further support is seen near the lower trendline of the ascending wedge at 1.3400.
Should the pair break above the 1.3540 resistance zone, it may signal a continuation of the bullish structure, strengthening confidence among retail and institutional traders alike.
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## Fundamental Drivers of USD/CAD Price Action
Beyond technicals, a variety of macroeconomic factors and monetary policy expectations are playing a critical role in driving the USD/CAD exchange rate.
### U.S. Dollar Strength: A Major Tailwind
The U.S. dollar has been supported by several economic developments:
– **Inflation Data:** The U.S. Consumer Price Index (CPI) print for July surpassed market forecasts, coming in at 3.2% year-over-year versus the expected 3.0%. Core CPI remained sticky at 4.1%, keeping the Federal Reserve vigilant.
– **Labor Market Stability:** The U.S. Labor Department reported that weekly jobless claims remained below 230,000 for the third consecutive week, supporting the case for a resilient economy.
– **Federal Reserve Outlook:**
– Recent Fed statements, including from Chair Jerome Powell, underline a “higher-for-longer” interest rate environment unless inflation clearly trends downward.
– Futures markets, as tracked by the CME FedWatch Tool, now reflect a 63% probability of another rate hike before the end of 2025.
This broader dollar strength, underpinned by strong U.S. macroeconomic indicators and hawkish Fed rhetoric, continues to propel USD/CAD higher.
### Canadian Dollar Weakness: A Supporting Factor
While crude oil, a major Canadian export, has shown modest price recovery, it has not been enough to lift the loonie in the face of economic softness in Canada:
– **GDP Figures:** Canada’s Q2 GDP growth missed expectations, coming in at 0.2% quarter
Read more on USD/CAD trading.