Canadian Dollar Short-term Outlook: USD/CAD Six-Day Rally Challenges Pivotal Resistance

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

• USD/CAD has rebounded sharply form the monthly low, bringing the pair back toward the upper bounds of the September range.
• The recovery is now testing a major resistance confluence with the Fed rate decision on tap.
• The near-term technical structure remains constructive, but buyers still need a confirmed breach higher to strengthen the case for a larger reversal.
• Holding above the monthly open would keep the immediate advance viable, while a deeper pullback would refocus attention on August support.
• Resistance 1.3942/55 (key), 1.3990/91, 1.4051- Support 1.39, 1.3854 (key), 1.3767/75

USD/CAD is back at a familiar inflection point after rebounding sharply from key support last week. The recovery has carried price into the upper end of the September range, where buyers will need to prove they can sustain the advance and force a more meaningful shift in the technical picture. With the Fed decision just hours away, the reaction at this threshold could determine whether the recovery develops into a larger reversal or begins to unravel. 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 multi-week downtrend resistance and that, “the focus is on possible inflection off this zone with the near-term recovery vulnerable while below this slope. From a trading standpoint, losses should be limited to 1.3767 IF a low is indeed in place with a daily close above 1.3955 needed to validate a larger reversal in trend.” The rally extended more than 1.5% off the August lows with USD/CAD registering an intraday high at 1.3940 before reversing sharply into the open of September. The pullback rebounded off support last week (registered a low at 1.3760) with price attempting to mark a sixth consecutive daily advance today.  The rally takes USD/CAD back into pivotal resistance at the monthly range high, and the focus is on a reaction off this threshold heading into FOMC.

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 ascending pitchfork extending off the monthly low with the median-line converging on key resistance over the next few days at 1.3942/55. This level is defined by the monthly opening range high, the 2025 September high-day close (HDC), the October low-day close (LDC), and the 38.2% retracement of the yearly range. A topside breach / daily close above this threshold is needed to suggest a more significant low is in place and validate a breakout of the late-June downtrend. Subsequent resistance objectives are eyed at the July low and the 50% retracement of the June decline at 1.3990/91 and the 61.8% retracement at 1.4051. Note that the 75% parallel converges on this level next week- look for a larger reaction there IF reached.

Look for initial support at the 1.39-handle, backed by the objective monthly open at 1.3855. The lower parallel converges on this zone into the close of the week and a break / daily close below this threshold would be needed to invalidate the monthly advance and would threaten another test of the key support at the August low-day close (LDC) and the 61.8% retracement of the 2026 range at 1.3767/75.

           

Bottom line: USD/CAD is once again testing pivotal resistance and the reaction off this mark will likely fuel the next directional move in price. From a trading standpoint, losses would need to be limited to 1.3854 IF price is heading higher on this stretch with a close above 1.3955 still needed to fuel the next major leg of the advance.

Attention turns squarely to the Federal Reserve decision in just a few hours, with markets largely priced for a 25-basis-point hike. With the move itself widely anticipated, the greater focus will be on the updated Summary of Economic Projections (SEP), the dot plot, and Chair Warsh’s press conference for clues on the monetary policy path into year-end. A more hawkish set of projections or continued concern over persistent inflation could fuel further U.S. dollar strength and potentially charge the breakout here. If the dot plot remains largely unchanged or policymakers acknowledge signs that inflationary pressures are beginning to stabilize, the reaction could temper U.S. dollar strength and cap the recent USD/CAD advance. Stay nimble into the release and watch the weekly close 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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• US Dollar Short-term Outlook: USD Selloff Accelerates Toward August Lows Ahead of NFP
• Swiss Franc Short-term Outlook: USD/CHF Breakout Puts Yearly Highs Back in Play
• Euro Short-term Outlook: EUR/USD Pullback Nears Pivotal Uptrend Support
• British Pound Short-term Outlook: GBP/USD Bulls Confront Resistance at Three-Month Highs

Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex