Canadian Dollar Outlook: USD/CAD Resistance Test

Canadian Dollar, CAD, USD/CAD Talking Points:

• USD/CAD remains in the long-term range following the February reversal and the sizable sell-off in Q2.
• More recently, it’s been a challenge at the 1.3500 level as sellers have been unable to press into the big figure, leading to a higher-low late last week.
• For USD-weakness, USD/CAD can remain as attractive largely on the basis of that longer-term range.
• I look into USD/CAD during each weekly webinar, and you’re welcome to join the next. Click here to register.

The U.S. Dollar is continuing to show resistance at a prior spot of support but USD/CAD is illustrating an element of grind as price works on the 1.3679-1.3694 resistance zone. This would be a touch more bullish than the USD chart of similar time frame and that would go along with the deduction that while DXY set a fresh low on the first day of Q3, USD/CAD held at a higher-low.

From the four-hour chart below we can see that continued grind with focus on the next zone of resistance-higher at the 1.3743-1.3751 zone.

USD/CAD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD Daily

Taking a step back to the daily highlights the stall that’s started to show around the 1.3500 level in the pair. From the longer-term look, there’s been a penchant for inflections or reactions to show around these major psychological levels, such as the support hit in Q3 last year at that 1.3500 price, or the resistance hit in Q2 of this year at the 1.4000 handle.

The fact that sellers haven’t yet been able to prod a test of 1.3500 suggests that there may be heavy short-side positioning in the pair, making a challenge for breakdown scenarios as sellers shy away from adding exposure around tests of fresh lows and, instead, take profits on shorts and allow for the build of higher-lows, such as what we saw on the first day of Q3 last week.

Does that mean that the trend is over? Not necessarily – as the more telling test of the trend will be how sellers react upon tests of resistance, or lower-highs; and this is illustrated by the 1.4000 reaction that showed towards the middle of last quarter, or the 1.3750 resistance test that’s shown in late-June.

Above 1.3750 is the June high of 1.3798, after which a zone re-enters the equation at 1.3889-1.3905; and above that is the same 1.4000 zone that held the highs in mid-Q2 before sellers went back on the attack, this spans from 1.3981-1.4000.

USD/CAD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD

It’s the bigger picture range that remains attractive in USD/CAD, and if we do end up with the deeper sell-off in the USD scenario, which seems to be the directive from the current administration, then continued bearish movement into that range remains an attractive theme. The challenge at this point for sellers is one of timing and positioning as the move has been fairly one-sided since the breakdown in early-Q2, when the 1.4000 level was finally taken-out.

So, if we do end up with a broader pullback, that could still work within the confines of the big picture range. The 1.4000 level becomes an obvious focal point and we’ve already seen how that played-out, as it held the highs over multiple days in the middle of Q2 after which sellers went on the attack and brought the pair down to a fresh low. But if we do see the pullback extend beyond that level, the 1.4151-1.4173 zone could be of interest, as that was a spot of resistance-turned-support that came into play after USD/CAD had topped in February; but, to date, there hasn’t been a resistance test there.

That zone is also confluent with the 50% marker of this year’s sell-off, so a test there would still retain the larger bearish structure that the pair has shown so far in 2025.

USD/CAD Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist