The USD/CAD Price Declines After Reaching Key Resistance: In-Depth Analysis and Market Outlook
By Economies.com, with supplementary insights and commentary
The USD/CAD currency pair experienced a notable pullback after recently reaching a key technical resistance level. The decline follows weeks of upward momentum, driven by a mix of monetary policy expectations, crude oil fluctuations, and geopolitical developments. As observed in the initial report from Economies.com on November 6, 2025, the pair’s downward movement confirms brief exhaustion of momentum, inviting traders and investors to reassess their outlook on the Canadian dollar (CAD) against the United States dollar (USD).
This article delivers an expanded and in-depth breakdown of the USD/CAD’s recent price action, examines contributing factors to its current trajectory, offers forecasts based on market data, and explores how traders can navigate the evolving dynamics of this major forex pair.
Key Takeaways from Economies.com’s Initial Analysis
According to the November 6, 2025, analysis published by Economies.com:
– USD/CAD retreated from previous highs after reaching a resistance near 1.3825.
– The price has failed to sustain upward momentum beyond this level.
– The bearish movement confirms the importance of the 1.3825 resistance and the market’s sensitivity to it.
– The short-term forecast indicates further downside potential, especially if the pair breaks below intermediate support zones.
Let’s dive deeper into the technical setup, fundamental drivers, market sentiment, and expected scenarios in the coming weeks.
Technical Analysis Breakdown
Resistance Rejection Near 1.3825
– The USD/CAD pair touched a high near 1.3825 earlier in the week.
– This level coincides with historical resistance from mid-2022 and Q1 2023, marking a strong supply zone where sellers have tended to dominate.
– The rejection from this area suggests renewed downward pressure and the emergence of profit-taking activity among traders.
Formation of Bearish Candlesticks
– Price action on the daily chart hints at the formation of a bearish engulfing pattern, a technical indicator that often signals a potential reversal.
– Momentum indicators such as the Relative Strength Index (RSI) showed overbought conditions before the reversal, supporting the view that the USD/CAD was due for a pullback or consolidation.
– Moving averages, especially the 50-day Exponential Moving Average (EMA), are flattening out, which may hint at range-bound motion in the near term.
Support Zones to Watch
– 1.3700: A psychological level and previous weekly support.
– 1.3660: Near the 50-day EMA and the Fibonacci retracement of the recent up-leg.
– 1.3550: A key pivot in case the downside intensifies.
Fundamental Drivers Behind the USD/CAD Movement
Several macroeconomic and geopolitical factors are contributing to the USD/CAD’s recent performance. Understanding these can help interpret the future trends of the pair.
1. Diverging Monetary Policy between the Fed and Bank of Canada
– U.S. Federal Reserve: The Fed has maintained a “higher for longer” interest rate stance, keeping borrowing costs elevated to tame persistent inflation.
– Bank of Canada (BoC): The BoC has signaled it may pause rate hikes as inflation in Canada slows faster than expected. However, core inflation remains sticky.
These diverging policies have created volatility in the USD/CAD pair.
According to the Bloomberg Economic Forecast (as of Q4 2025):
– The Fed is expected to maintain rates at 5.50% until at least Q2 2026.
– The BoC may consider trimming rates in early 2026 if inflation remains subdued.
This divergence could initially favor USD strength, but rising expectations of a U.S. economic slowdown have started to weaken the bullish case.
2. Crude Oil’s Influence on CAD
– Canada is a major oil exporter, so the price of crude
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