**Canadian Dollar Technical Outlook: USD/CAD at a Pivotal Juncture**
*By Matt Weller, FOREX.com — Adapted and expanded by Assistant*
The Canadian dollar (CAD) has shown increasing volatility in recent weeks, reacting to both domestic developments and external market forces. USD/CAD, one of the most closely followed currency pairs involving the loonie, has reached a technically significant point, attracting attention from traders and investors alike.
This article explores the latest trends in the USD/CAD pair, breaking down the technical indicators and macroeconomic influences shaping its trajectory. Insights are drawn from the original piece authored by Matt Weller at FOREX.com and expanded with additional context and analysis.
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## Current Market Overview
The USD/CAD exchange rate has recently bounced higher after finding support near the 1.3600 level. This consolidation has occurred in the broader context of fluctuating risk sentiment, diverging central bank policies, and changing oil prices.
### Key Catalysts Driving USD/CAD
Several fundamental and technical drivers are influencing the USD/CAD pairing:
– **Diverging Central Bank Policies**: The U.S. Federal Reserve has signaled a cautious and data-driven approach toward cutting interest rates, while the Bank of Canada (BoC) recently commenced its easing cycle with a 25bps rate cut.
– **Oil Prices**: As a commodity-linked currency, the Canadian dollar often tracks crude oil prices. The recent pullback in WTI crude has weighed on CAD.
– **U.S. Dollar Strength**: Modestly hawkish signals from the Federal Reserve continue to support the USD, particularly when compared to dovish stances by other central banks.
– **Economic Data**: Canadian GDP and employment figures have shown signs of weakness, while the U.S. labor market remains tight, supporting policy divergence.
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## Technical Analysis of USD/CAD
Matt Weller’s analysis focuses on traditional technical indicators to assess USD/CAD’s recent performance and project its future path. The pair has exhibited textbook behavior around key levels, reflecting a balance between buyers and sellers.
### Higher-Timeframe Structure
– The USD/CAD trim on the daily chart shows a series of higher lows, confirming a medium-term uptrend.
– Since bottoming near 1.3200 in late 2023, the pair has gradually moved higher, creating an ascending trendline on the daily timeframe.
### Support and Resistance Levels
– **Support**:
– 1.3600 remains a solid support zone as it aligns with both rising trendline support and a previous area of consolidation.
– 1.3500 is the next lower support level and could serve as a major inflection point if broken.
– **Resistance**:
– 1.3750 to 1.3780 is a short-term resistance band that held back last week’s price advance.
– The next level to watch is the swing high near 1.3850, the March 2024 peak. A breakout here would signal a continuation of the upward momentum.
### Fibonacci Levels
– The 50% Fibonacci retracement of the November–March rally sits near 1.3590, reinforcing the technical significance of that area.
– The 61.8% level comes in near 1.3500 and intersects with trendline support from the October 2023 low.
### Moving Averages
– The 50-day simple moving average (SMA) is hovering around 1.3635 and has provided near-term support during pullbacks.
– The 200-day SMA, located around 1.3480, remains well below the current price, reflecting the overall bullish structure.
### RSI and Momentum Indicators
– On the daily chart, the Relative Strength Index (RSI) remains in neutral territory around 55. This suggests no immediate overbought or oversold pressure.
– A sustained break above the 1.3780 area could push RSI into
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