**USD/CAD Price Forecast: Outlook Points Toward Further Weakness Below 1.3640**
*By: FXStreet News (original author: FXStreet Editorial Team)*
*Adapted and expanded by: ChatGPT*
The USD/CAD currency pair has been under notable downward pressure, breaking through key technical levels and signaling the likelihood of extended bearish momentum. As macroeconomic themes and market sentiment continue to sway in favor of the Canadian dollar, several technical and fundamental indicators suggest the pair could move lower. Originally reported by the FXStreet editorial team, this article expands upon those insights with additional technical and fundamental analysis.
This extended forecast examines the various technical indicators pointing to a continuation of USD/CAD’s current downtrend, the macroeconomic factors influencing the pair, and possible short- to medium-term scenarios.
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## Key Technical Highlights
USD/CAD has broken below a critical support level at 1.3640, which previously acted as a strong barrier to downside moves. Several other technical indicators underline the bearish case for this pivotal currency pair.
– **Lower High Formation**: From a technical standpoint, the pair has formed lower highs on the daily chart, indicating seller dominance.
– **200-Day Moving Average (DMA)**: Price action has broken below the 200-DMA, a significant long-term indicator. This implies a transition from a neutral or bullish outlook into a potential bearish market phase.
– **Support at 1.3580 and 1.3530**: The pair is hovering near its next support levels, with 1.3580 acting as short-term mild support. A breach below this could expose the 1.3530 zone, which corresponds to previous swing lows observed in October 2023.
– **Resistance at 1.3640 and 1.3700**: Should there be a short-term recovery in USD strength, resistance is expected to emerge near 1.3640. A more sustained bullish reversal would have to challenge the 1.3700 zone.
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## Expanded Technical Indicators
The analysis can be deepened by incorporating additional momentum and trend indicators. Here’s a look at the more comprehensive technical outlook:
### 1. Relative Strength Index (RSI)
– The RSI on the daily timeframe has slipped below the 50 mark, indicating a shift toward bearish momentum.
– A move closer to 30 would suggest the pair may become oversold in the short term, possibly setting the stage for a technical bounce, but trends remain dominant.
### 2. Moving Average Convergence Divergence (MACD)
– The MACD on both daily and 4-hour charts shows a bearish crossover, suggesting increased downside momentum.
– The signal line has also pointed lower with widening histogram gaps, emphasizing downward pressure.
### 3. Fibonacci Retracement Levels
– If we plot Fibonacci retracement from the October 2023 low to the late November 2023 high, the 61.8% retracement aligns with the 1.3550 level, signaling a key area of structural support.
### 4. Chart Patterns
– A descending triangle pattern appears to be forming, signaling potential for further declines.
– If the base of the triangle at around 1.3580 breaks downward, the pattern suggests a possible measured move target near 1.3450.
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## Macro-Fundamental Backdrop
Besides pure technical indicators, the macroeconomic climate strongly influences the USD/CAD dynamic. Several prominent themes are currently impacting the exchange rate.
### 1. Diverging Interest Rate Expectations
– **Federal Reserve (Fed)**: As of late December 2023, the Federal Reserve has maintained a cautious stance, keeping the federal funds rate in the 5.25–5.50% range. However, market participants have begun pricing in potential rate cuts for mid-2024 as inflation cools.
– **Bank of Canada (BoC)**: The BoC maintains a similarly hawkish-neutral stance,
Read more on USD/CAD trading.