Canadian Dollar Short-term Outlook: USD/CAD Collapse Continues After Fed & BoC Decisions

 

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

• USD/CAD on pace to mark a third-weekly decline with price plunging another 0.38% today on the heels of the BoC and Fed rate decisions
• While the medium-term outlook remains tilted lower, the near-term decline may be vulnerable as price approaches trend support, risk for inflection into the lower parallel.
• Resistance ~1.3850, 1.3881-1.3904 (key), 1.3938/42- Support 1.3769, 1.3722/34 (key), 1.3669

The Canadian Dollar offensive extended this week with USD/CAD taking another leg lower today on the heels of the Bank of Canada and FOMC interest rate decisions. The decline is now approaching the lower bounds of the late-November downtrend and while the medium-term outlook remains tilted to the downside, the immediate decline may be vulnerable into this key slope. The threat for near-term price inflection rises into the close of the week with a close below support needed to mark resumption of the broader downtrend. 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, “testing uptrend resistance today- risk for possible price inflection off this mark.” The level in focus was the November high-day close (HDC) at 1.4109- USD/CAD attempted to break above this key zone for three days before succumbing with price plunging more than 2.5% off the November highs into the turn of the month. The decline marked a decisive break of the July uptrend with the sell-off approaching downtrend support in the wake of the BoC and Fed rate decisions. The immediate focus is on a reaction into the lower parallel of this descending pitchfork with daily momentum (RSI) now falling to the weakest level since June.

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 an embedded channel extending off the late-November high. Initial support rests with the 61.8% retracement of the June advance at 1.3769 and is backed by a more significant confluence zone at 1.3722/34- a region defined by the August and September lows, and the 2025 low-week close (LWC). Look for a larger reaction there IF reached with a break / close below this threshold threatening another bout of accelerated losses. Subsequent support rests with the 78.6% retracement at 1.3669.

Initial resistance is eyed at the highlight slope confluence near ~1.3850 and is backed by a key pivot zone at 1.3881-1.3904- a region defined by the 2022 high close, the 2023 high and the 200-day moving average. A breach / close above this threshold would be needed to suggest a more significant low is in place and that a larger trend reversal is underway. Subsequent resistance objectives eyed at the November low / October low-day close (LDC) at 1.3938/42 and the 2022 high at 1.3978.

 

Bottom line: A three-week decline in USD/CAD is now approaching key technical support barriers at the lower bounds of the late-November downtrend. While the medium-term outlook remains weighted to the downside, the decline may be vulnerable near-term into this threshold, and the risk rises for inflection at the lower parallel. From a trading standpoint, look to zone to reduce short-exposure / lower protective stops on a drop towards trend support. 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.

Keep in mind we get the release of the November Non-Farm Payrolls report and key inflation data next week. With the recent FOMC commentary suggesting that the labor market remains a major concern, employment data will be critical in the coming months as the markets weigh the prospects for monetary policy into 2026. 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