Canadian Dollar Outlook: USD/CAD Plunge Halted- Bulls Try to Regain Control

Canadian Dollar Technical Outlook: USD/CAD Short-term Trade Levels

• USD/CAD rebounded off near-term support on the heels of President Trump’s remarks at Davos
• While the medium-term outlook remains tilted lower, the immediate focus is on a reaction of the 200-day moving average for guidance
• Resistance ~1.3839, 1.3874 (key), 1.3925- Support 1.3786, 1.3752, 1.3722/27 (key)

USD/CAD has steadied after a sharp selloff, with price rebounding from key Fibonacci support today. The move followed remarks from President Trump at the World Economic Forum in Davos, which helped temper near-term downside pressure and sparked a modest recovery attempt. While the broader structure remains fragile after the recent breakdown, the immediate focus is on whether bulls can regain traction as price approaches key resistance levels. How USD/CAD behaves here will be critical in determining whether the rebound develops into a broader recovery or proves to be a corrective pause within the larger decline. Battle lines drawn on the USD/CAD short-term technical charts.

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Canadian Dollar Price Chart – USD/CAD Daily

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

Technical Outlook: In last month’s Canadian Dollar Short-term Outlook, we noted that USD/CAD was approaching trend support and that, “Rallies should be limited to the 1.38-handle IF price is heading lower on this stretch with a close below 1.3722 needed to fuel the next major leg of the decline.” A rebound in mid-December failed at 1.3806 before reversing sharply lower, with the decline plunging more than 1.1% to fresh five-month lows into the Christmas holiday.

USD/CAD rebounded off the 78.6% retracement of the June advance at 1.3669 into the close of the year with a nine-day rally exhausting last week at the August high near 1.3925. The bears are now attempting to mark a third-consecutive daily decline with a break of the late-December uptrend on Monday rebounding off the 50% retracement today at 1.3786. Things get a bit dicey here and while the threat of further losses remains, the immediate focus is on potential reaction near the 200-day moving average just higher, and the bulls would need to secure a close above to alleviate downside pressure here.

Canadian Dollar Price Chart – USD/CAD 240min

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

Notes: A closer look at Canadian Dollar price action shows USD/CAD trading within the confines of a proposed descending pitchfork extending off the monthly high. Initial resistance is now eyed with the 200-day moving average (currently ~1.3839) and is backed last week’s swing low at 1.3855 and the 61.8% retracement at 1.3874. Note that the upper parallel converges on this threshold next week and a breach / daily close above would be needed to suggest a more significant low is in place and invalidate the weekly downtrend.

A break lower from here exposes subsequent support objectives at the 61.8% retracement of the December advance at 1.3752 backed by a more significant confluence zone at 1.3722/27- a region defined by the August low, the 2026 yearly open, and the September low. A break / daily close below this threshold would be needed to fuel the next major leg of the November downtrend towards 1.3669 and beyond.

 

Bottom line: USD/CAD rebounded off support today on the heels of President Trumps speech at Davos and the immediate focus is on this near-term recovery. From a trading standpoint, rallies would need to be limited to 1.3874 IF price is heading lower on this stretch with a close below 1.3785 needed to fuel the next leg of the decline.

Keep in mind tomorrow we get the release of the November Personal Consumption Expenditures, the Fed’s preferred inflationary gauge. On the back of last week’s better-than-expected CPI print, the data will be critical in determining the timing of the central bank’s next rate cut. Markets are currently pricing a 63% probability for the first rate cut of the year to be at the June decision, and a slower pace of price growth has the potential to bring forward those expectations to the detriment of USD. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest Canadian Dollar Weekly Forecast for a closer look at the longer-term USD/CAD technical trade levels.

Key USD/CAD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex