**USD/CAD Weekly Technical Outlook: Bearish Reversal Risks Increase Amid Market Uncertainty**
*Adapted and expanded from Action Forex’s original analysis by ActionForex.com*
The USD/CAD currency pair faced some significant challenges in the past week, triggering discussions among forex traders and analysts regarding a potential shift in market sentiment. The pair saw notable volatility amid broader USD weakness, resilient Canadian economic data, and fluctuations in global oil prices. This report offers a comprehensive, 1000-word technical and fundamental outlook for USD/CAD, emphasizing possible scenarios as we head into the coming week.
## Summary of Recent Price Action
During the past week, USD/CAD declined decisively, marking a potential turning point after weeks of moderate upward momentum. The weekly close beneath key support levels raises the probability of deeper correction or even a bearish reversal.
– **Previous Week’s Performance**: The pair dropped sharply to test the 1.36 level, closing significantly lower for the week. The retreat from the 1.3790 high suggests exhaustion in recent bullish momentum.
– **Volatility Drivers**: Key catalysts included dovish comments from the Federal Reserve, solid Canadian labor market data, and recovery in crude oil prices, which tend to support the Canadian dollar.
## Technical Analysis
### Weekly Chart Overview
USD/CAD broke beneath its short-term rising channel originating from the December 2023 low at 1.3176. The breach of channel support and proximity to the 1.3600 psychological level indicate a possible shift in medium-term trend dynamics.
– **Resistance Areas**:
– 1.3790: Week’s high and potential double top with the February 2024 peak.
– 1.3860: Multi-month resistance zone from late 2022 and early 2023.
– **Support Areas**:
– 1.3600: Strong psychological support that held the pair temporarily.
– 1.3480–1.3500: Previous consolidation area and 38.2% Fibonacci retracement of the December–April rally.
– 1.3350: 61.8% Fibonacci retracement and potential reversal zone.
The breaking of the lower trendline and price stalling near the 1.3600 support suggests that bulls may be losing control and sellers could dominate in the coming sessions.
### Daily Chart Trends
Zooming into the daily chart, USD/CAD cleared its 20-day moving average and approached key support at the 100-day SMA.
– **Technical Indicators**:
– Relative Strength Index (RSI) has dipped below 50, indicating bearish divergence.
– MACD histogram is on the verge of turning negative, signaling potential momentum reversal.
– Price action formed a bearish engulfing candle earlier in the week, reinforcing concerns over extended upside.
If the pair sustains trade below 1.3600 in the medium term, further downside pressure may follow.
### Technical Forecast: Bearish Bias Building
The downside move has shifted the bias to bearish in the short to medium term. While a minor rebound is possible on oversold conditions, any uptick is likely to be capped by the 1.3700–1.3750 resistance area.
– **Near-Term Bearish Targets**:
– 1.3480: If price sustains below 1.3600 support.
– 1.3350: Key support level, representing Fibonacci confluence zone.
Daily closes below 1.3600 would validate a deeper correction, potentially reversing the uptrend initiated earlier this year.
## Fundamental Drivers
The USD/CAD movement last week was not only technical in nature. Fundamental dynamics played a central role in shaping sentiment. Here’s a review of the primary macroeconomic events and factors.
### 1. Federal Reserve Policy Outlook
The US dollar weakened amid increasing expectations that the Federal Reserve may ease sooner than previously anticipated due to cooling inflation and slowing economic growth.
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