CAD Crush: USD/CAD Towards 1.3500, GBP/CAD, CAD/JPY

It’s a strong start to the week for the Canadian Dollar and in USD/CAD, there’s already been a big test at the psychological level of 1.3500. This has been a sticking point for the past decade-plus as the pair has been in a range and this follows last year’s fight at both 1.4500 and 1.4000 as key inflection points showed around major psychological levels. If USD/CAD does lose the 1.3500 handle, it’s the 1.3420 level that stands out before next support stands in around 1.3225.

USD/CAD Monthly Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD Shorter-Term

It was the 1.3700 level where the music stopped on the long side last week, with two different tests failing to leave the price behind The swing low between those two point remains of reference as this is now a spot of support turned possible resistance, plotted from 1.3625-1.3643. If sellers remain aggressive, even 1.3600 could be argued as a spot for a possible lower-high but on the downside, it’s all about that 1.3500 handle as a price of that nature often takes time before sellers can ultimately break through for a clean run of continuation.

With that said, if looking for CAD-strength, there may be more amenable pastures elsewhere.

USD/CAD Four-hour Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/CAD

GBP/CAD has been moving sideways in a relatively tight range for almost a year now. Price popped up to the 1.8800 level in March of last year and since then there’s been several failed runs from bulls. Meanwhile, support has held in from around 1.8325-1.8405 with a series of recent higher-lows, but if that zone does give way, there’s scope for reversal as the longer-term rising wedge denotes bearish potential in the cross pair.

GBP/CAD Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

Shorter-term, GBP/CAD has similarly held up at the 1.8500 level but a breach below that exposes the longer-term support zone from 1.8325-1.8405. And if sellers can wiggle below that, then we might have a larger bearish reversal setup to work with.

GBP/CAD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

CAD/JPY

CAD/JPY is bristling for a potential breakout but with so much volatility in the Yen, I think we need to be open-minded about next steps.

If looking for CAD-weakness potential, we need to locate a currency that could see some form of strength. And while currency strength has not really been a thing for the Japanese Yen for a long time, the technical setup in CAD/JPY, at the least, holds out some potential for a reversal – if we do see a few pieces falling into place.

At this point the pair is at a familiar spot of resistance at the 115.00 handle. This is also the 78.6% retracement of the 2024-2025 sell-off in the pair.

CAD/JPY Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

CAD/JPY Daily

From the daily chart this isn’t something that can be construed as bearish as we have a v-shaped reversal with price pushing right back up to resistance. Prior support showed right around the 112.00 level, which was prior resistance, and that’s what sellers will ultimately need to take out if they do want to prod a big-picture reversal in the pair.

For now, the focus is on a breakout from resistance and what happens next.  If we get continuation, then short-term support for bullish momentum plays sets up at the same 115.00 area that’s currently holding the highs. If, however, we see a reversal as indicated by a wide-upper wick, then short-term reversal strategies become favorable and that would first need to set up for a test of the 114.00 handle followed by 113.00 and then the key support around 112.00.

CAD/JPY Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro