**USD/CAD Price Forecast: Renewed Bearish Momentum as Pair Breaks Below 1.3720**
*By: Ravikumar Krishnamurthy (Adapted and Expanded with Additional Analysis)*
The USD/CAD currency pair has shown fresh signs of weakness as the exchange rate dips below the key psychological and technical level of 1.3720. This move reflects a broader bearish trend taking shape as market sentiment shifts, driven by a combination of dovish signals from the Federal Reserve, strengthening crude oil prices, and improving risk appetite. The Canadian dollar (CAD), closely tied to oil prices due to Canada’s oil exports, gains traction, further weighing on the USD/CAD.
This analysis expands on the original article by Ravikumar Krishnamurthy of FXStreet and integrates data from other financial sources to provide a comprehensive update on the USD/CAD outlook.
## USD/CAD Technical Breakdown: Breach Below Crucial Support
On Tuesday, December 18, 2025, USD/CAD broke decisively below the 1.3720 mark, a significant support zone observed in recent sessions. This move is crucial, as it comes after several failed attempts to sustain gains above that level. The pair is now eyeing further declines, with momentum indicators signaling weakening bullish pressure.
### Key Technical Indicators:
– **50-Day Exponential Moving Average (EMA)**: The USD/CAD has dropped below its 50-day EMA, signaling a shift in short- to mid-term momentum in favor of sellers.
– **Relative Strength Index (RSI)**: Currently flirting with the midline (50), the RSI offers a neutral-to-bearish bias. A move below 45 would suggest accelerating bearish momentum.
– **Short-Term Support**:
– 1.3680: Minor intraday support from recent lows
– 1.3660: 100-day EMA positioning
– 1.3570: Key swing low from early November
– **Near-Term Resistance**:
– 1.3720: Now flipped to resistance following the breakdown
– 1.3760: 50-day EMA ceiling
– 1.3800: Round-number psychological level
### Chart Pattern Analysis:
– The pair recently formed a lower high around 1.3785, suggesting a weakening uptrend.
– The descending resistance from November’s highs supports the bearish thesis.
– Daily candlestick patterns have shown increased selling wick formations, particularly long upper shadows, hinting at rejection at higher levels.
## Macro Factors Driving USD/CAD Lower
A confluence of macroeconomic drivers is placing continued pressure on the USD/CAD pair.
### 1. Dovish Federal Reserve Signals
The most notable market-moving event influencing USD/CAD recently was the Federal Reserve’s dovish posture in its December 2025 policy announcement.
– **Fed Funds Target Rate**: The Federal Reserve held interest rates steady at 5.25%–5.50% for the third consecutive meeting, signaling the end of its aggressive rate-hiking spree.
– **Dot Plot Projections**: The FOMC’s dot plot now shows three rate cuts projected for 2026, signaling a dovish outlook.
– **Chair Powell’s Comments**: Fed Chair Jerome Powell cited slowing inflationary pressures and said discussions of rate cuts had begun, further weighing on the U.S. dollar.
– **Market Expectations**: Fed funds futures are now pricing the first rate cut as early as March 2026, with a total of 100 basis points of cuts expected over the year.
The cooling inflation backdrop and the Fed’s pivot toward easing has led to a broad-based USD selloff, particularly against commodity-linked currencies like the Canadian dollar.
### 2. Rising Crude Oil Prices Favor the Canadian Dollar
Oil prices, a significant influence on the Canadian economy and the CAD, have seen a steady recovery this month.
– **WT
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