Canadian Dollar Forecast: USD/CAD 2.3% Reversal Threatens September Rally

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD has retreated sharply from its October highs, surrendering much of the September advance as selling pressure intensifies.
• The decline is approaching a pivotal support zone, where a potential exhaustion low could begin to develop.
• A weekly close below support would threaten a deeper correction toward the yearly uptrend while a sustained recovery above weekly resistance would strengthen the case for a more significant low.
• The Fed decision, U.S. GDP and PCE inflation data, and Canadian GDP could fuel volatility into the monthly close.
• Resistance 1.4140 (key), 1.4256, 1.4392– Support 1.40, 1.3944/49 (key), 1.3888

Canadian Dollar has strengthened considerably in recent weeks, driving USD/CAD toward a major technical inflection zone as October draws to a close. While the immediate risk remains tilted lower, the approach toward confluent Fibonacci support raises the prospect of an exhaustion low that could offer bulls an opportunity to regain control. The Bank of Canada's latest rate hike has shifted attention squarely toward today's Federal Reserve decision, where Chair Kevin Warsh's guidance on further tightening could prove decisive for the U.S. Dollar. With U.S. growth and inflation data still ahead, followed by Canadian GDP on Friday, the reaction around these technical thresholds could provide important guidance for the November outlook. Battle lines drawn on the USD/CAD weekly technical chart.

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Canadian Dollar Price Chart – USD/CAD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Technical Outlook: In last month’s Canadian Dollar Technical Forecast we noted that USD/CAD was, “poised to mark a fourth consecutive weekly advance with price rallying 14 of the past 15 days. From a trading standpoint, look to reduce portions of long-exposure on a stretch towards 1.4240- losses would need to be limited to 1.4140 IF price is heading for a breakout..” USD/CAD registered a close high at 1.4256 the following week and despite stretching to an intraday high at 1.43, the bulls were unable to secure a breakout above the 61.8% retracement. The subsequent reversal extended more than 2.3% with the decline settling just above the 1.40-handle ahead of today’s central bank rate decisions.

The immediate focus is on possible inflection of this zone with key support seen just lower at the August high-week close (HWC) and the 61.8% retracement of the August rally at 1.3944/49. A break / weekly close below this threshold would threaten a test of the yearly uptrend with subsequent support objectives seen at the 52-week moving average (currently ~1.3888) and the 78.6% retracement at 1.3854. Note that the lower parallel converges on this threshold into the start of November- look for a larger reaction there IF reached.

Weekly resistance is now eyed at the yearly high-week close (HWC) and the November swing high at 1.4140. A breach / weekly close above this threshold is needed to suggest a more significant low is in place, and a lager reversal is underway. Subsequent resistance is eyed at the 2026 high-close at 1.4256 with key resistance steady at the 2025 HWC and the 61.8% retracement of the 2025 decline at 1.4292.

Bottom line: USD/CAD is approaching pivotal support with major event risk on tap into the close of the week. We are on the lookout for a potential exhaustion low in the weeks ahead. From a trading standpoint, the threat for further losses remains but losses would need to be limited to 1.3944 for the September advance to remain viable with a close above 1.4140 needed to fuel the next major leg of the advance.

USD/CAD event risk into the close of the week remains heavily concentrated around the Fed after the Bank of Canada raised rates by 25 basis points and warned that inflation could remain elevated for longer. With the BoC decision largely priced in, the focus now shifts to whether Chair Warsh reinforces expectations for another Fed hike in December or signals a more cautious approach. A hawkish Fed would likely support the dollar and keep USD/CAD bid, while a less forceful message could allow the Canadian dollar to extend its gains. Thursday’s U.S. GDP and PCE inflation data, followed by Friday’s Canadian GDP report, will offer additional guidance on the growth and policy outlook before month-end positioning potentially amplifies volatility. Stay nimble into the monthly cross and watch the weekly close for directional guidance. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex