**US Dollar Forecast: USD/CAD Maintains Momentum with Three-Day Rally**
*Original article by Matt Weller, FOREX.com. Expanded and adapted with additional market analysis.*
The US dollar continues its upward trajectory against the Canadian dollar, extending a three-day rally and pushing the USD/CAD currency pair near key technical resistance levels. Amid a confluence of economic indicators and central bank dynamics, this move reflects investors’ shifting expectations about interest rates, energy markets, and broader macroeconomic forces. In this article, we explore the fundamentals behind the recent USD/CAD movement, delve into the technical picture, and assess the likely trajectory moving forward in light of upcoming economic data and central bank commentary.
## USD/CAD Overview: Current Market Behavior
The USD/CAD currency pair has seen renewed strength, with the US dollar appreciating sharply against the Canadian counterpart over the past few trading sessions. As of early September 2025, the pair has reached levels not seen in several weeks, flirting with highs near the 1.3800 zone. The move is part of a three-day uptrend that has drawn attention from technical analysts and market observers.
### Key Drivers of USD/CAD Rally
1. **US Economic Surprise**
– Recent US economic data has exceeded expectations, particularly in areas such as employment and manufacturing.
– The US ISM Manufacturing Index recently printed above 50, indicating a return to expansion in the factory sector, boosting confidence in the resilience of the US economy.
– Jobless claims and payrolls data have also been robust, suggesting that the labor market remains tight.
2. **Interest Rate Expectations and Fed Policy**
– Federal Reserve officials have maintained a hawkish tone as they signal a wait-and-see approach on future rate cuts.
– The strong economic data have led markets to scale back expectations of an imminent rate cut, pushing US Treasury yields higher.
– Increased US yields have supported the dollar due to increased capital inflows, contributing to the bullish momentum in USD/CAD.
3. **Canadian Economic Slowdown**
– In contrast to US strength, the Canadian economy has shown signs of fatigue.
– Canada’s Q2 GDP figures came in weaker than expected, confirming economic deceleration.
– As a result, traders and economists are growing more confident that the Bank of Canada (BoC) may pivot toward rate cuts sooner than the Federal Reserve.
4. **Fall in Oil Prices**
– The Canadian dollar is strongly correlated with crude oil prices, as oil is a significant export for Canada.
– Recent softness in global oil markets, including a drop in WTI crude prices toward the $80/bbl mark, has weighed on the loonie.
– Concerns about Chinese demand and global economic growth have led to reduced appetite for commodities like oil.
## USD/CAD Technical Analysis
The current rally in USD/CAD shows strength from both a fundamental and technical perspective. Bulls are controlling the directional bias, with the pair approaching major resistance levels that could determine the course of the next move.
### Support and Resistance Levels
– **Immediate resistance** lies near 1.3700 to 1.3740, aligning with recent swing highs.
– A decisive break above 1.3740 would open the door toward a test of the March and April 2024 highs around 1.3850 to 1.3900.
– **Initial support** is seen at 1.3600, followed by stronger demand near the 1.3500 psychological level, where the 50-day moving average may also come into play.
### Momentum Indicators
– RSI (Relative Strength Index) on the daily chart remains below overbought levels, suggesting potential for further upside.
– MACD (Moving Average Convergence Divergence) indicates bullish momentum as the signal line diverges from price.
Traders will be closely watching whether the pair can maintain traction above 1.3650 and capture 1.3700
Read more on USD/CAD trading.