Title: Canadian Dollar Forecast – USD/CAD Consolidates Below Key Resistance in September 2025
By Matt Weller, originally published on Forex.com
Additional research by Open AI
The Canadian dollar (CAD) continues to trade in a tight range against the US dollar (USD) as the USD/CAD currency pair remains capped beneath a key multi-month resistance zone amid a complex macroeconomic landscape. As we move further into September 2025, traders are closely examining this pair’s chart patterns, evolving economic data from Canada and the US, interest rate differentials, and commodity price movements—particularly crude oil, which is a significant driver of the Canadian economy.
This article offers an in-depth look at why USD/CAD is consolidating below key resistance and what factors may drive the currency pair in the weeks to come. We’re also reviewing broader technical indicators, macroeconomic drivers, and central bank expectations that could shape the pair’s longer-term trajectory.
Summary of Key Factors:
– USD/CAD has consolidated below key resistance levels defined by a yearly downtrend
– Bank of Canada (BoC) is maintaining a cautious monetary policy tone after recent rate cuts
– The US Federal Reserve remains hawkish, potentially keeping USD supported
– Oil price volatility adds uncertainty to CAD demand
– Technical charts suggest USD/CAD is in a coiling phase, potentially setting up for a breakout
Technical Overview: USD/CAD Under Long-Term Resistance
The USD/CAD pair climbed from its July lows but has failed to breach a significant downtrend resistance line dating back to early 2023. This resistance now lies near the 1.3700 level, acting as a ceiling for recent price action.
– The pair has tested this zone multiple times throughout 2024 and 2025 but has yet to establish a convincing breakout.
– Current momentum indicators are neutral, showing a lack of directional conviction.
– Near-term support remains near the 1.3500 psychological level and a key cluster of moving averages.
– A breakout above 1.3700 could potentially open a move toward 1.3900, a pivot from earlier in 2023.
– Conversely, a sustained breakdown below 1.3450 could expose the 1.3300 level, aligned with the 200-day moving average.
This type of price action points to consolidation—a market condition defined by narrowing price ranges that often precedes a significant directional move. Traders are watching closely to determine whether USD/CAD will break higher or lower.
Canadian Economic Outlook: Mixed Signals
Canada’s economic performance has been showing signs of softening in recent quarters, despite earlier resilience in the labor market. Inflation pressures, once a dominant theme in 2022 and early 2023, have begun to moderate, somewhat alleviating pressure on the Bank of Canada (BoC). However, growth concerns are becoming more prominent.
– Canada’s Q2 2025 GDP came in below expectations at 0.5% quarter-over-quarter, suggesting economic expansion is slowing.
– The unemployment rate edged up to 5.7% in August 2025, the highest since early 2022.
– Headline inflation ticked down to 2.9% in July 2025, inching closer to the BoC’s 2% target.
– Core inflation metrics also softened, which may provide the central bank with more flexibility to maintain rates or even cut further if needed.
As a result, the BoC is expected to remain on hold through the rest of 2025 unless there’s a significant divergence in inflation or labor market trends. Market participants are pricing in at least one additional BoC rate cut by Q1 2026, further weakening the CAD’s yield appeal.
Bank of Canada Policy Developments
– The BoC held its policy rate steady at 4.25% in its September 2025 meeting.
– Governor Tiff Macklem acknowledged economic headwinds, including reduced investment and a cooling housing market.
Read more on USD/CAD trading.