Canadian Dollar Short-term Outlook: USD/CAD Tests Pivotal Resistance– Breakout Risk Builds

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

• USD/CAD has rebounded from early-March lows and is now testing a well-defined resistance zone for a second time this month.
• Price remains capped beneath this pivot, with the advance vulnerable unless a decisive break higher is secured.
• Major Event risk on tap with the Federal Reserve & Bank of Canada interest rate decisions tomorrow
• Resistance 1.3722/33 (key), 1.3759, 1.3801/11- Support 1.3645, 1.3608 (key), 1.3540/51 (key)

USD/CAD has pushed back toward a key resistance zone after recovering from recent lows, bringing price once again into a critical decision area. This level has already capped advances for the past two-months, and the current retest comes as markets brace for major central bank updates. While the rebound reflects improving near-term momentum, the broader structure remains unresolved beneath this ceiling. A decisive breakout would mark a shift toward a more sustained recovery, while another failure here could reinforce the range and keep downside risks in play. 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 is testing resistance at the monthly range highs today and the focus is on a reaction off this pivot zone.” The level in focus was 1.3722/33- a region defined by the September & August swing lows, the objective yearly open, the February opening-range high, and the 38.2% retracement of the November decline. The bulls attempted to break higher on March 3^rd but failed to secure a close with USD/CAD plunging more than 1.6% early in the month.

The decline rebounded off support last week at the 78.6% retracement of the January rally and the February close low at 1.3540/51. The subsequent rebound (1.6%) takes USD/CAD back into pivotal resistance again this week and the focus once again is on inflection off this key zone. The immediate advance is vulnerable while below this threshold with a breach / close above needed to suggest a more significant trend reversal is underway.

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 carving the weekly opening-range just below key resistance. Look for the breakout here to offer near-term guidance.

A breach / close above 1.3733 would validate a breakout of the February / March opening-range highs suggest a more significant trend reversal is underway. Subsequent resistance objectives are eyed at the 61.8% retracement of the year-to-date range at 1.3759 and the 200-day moving average / 50% retracement of the November decline at 1.3801/11. Look for a larger reaction there IF reached.

Monthly open support rests at 1.3645 and is backed by the 61.8% retracement of the monthly advance at 1.3608. Ultimately, a break / close below 1.3540 would be needed to mark resumption of the November downtrend.

 

Bottom line: The USD/CAD is testing pivotal resistance at multi-monthly range highs today with the Fed and Bank of Canada rate decisions on tap tomorrow. From at trading standpoint, pullbacks should be limited to 1.36 IF price is heading higher on this stretch with a close above 1.3733 needed to fuel the next leg of the advance.

Keep in mind the Fed will release its updated Summary of Economic Projections tomorrow, with revisions to the growth, employment, and inflation forecasts. Elevated energy prices driven by the Iran conflict are likely to keep inflation risks front and center, while last month’s weak Non-Farm Payrolls report underscores growing downside risks in the labor market- intensifying the tension within the Fed’s dual mandate.

The focus will be on the updated inflation projections, as any upward revision to the outlook could further delay expectations for a Fed rate cut. As of today, Fed funds futures are pricing roughly a 56% probability that the next cut will come in October, marking a sharp shift from pre-war expectations that favored a July move. Stay nimble into the release tomorrow 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