USD/CAD Snaps
If we look at a long-term chart of USD/CAD there’s been a propensity for turns and inflections to show at major psychological levels. Last year, for instance, it was the 1.4500 level that finally stalled buyers after an aggressive breakout to begin the year. And then in the middle of last year, it was the 1.4000 handle that was an important point of contention, holding resistance in May and then a pretty significant grind later in the year. But, even longer-term, the effect of these round levels can carry a large impact, as we can see from the past decade in USD/CAD.
USD/CAD Weekly Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/CAD Shorter-Term
At this point USD/CAD has pushed into deep oversold territory on the daily chart, and given this fresh test of a major psychological level, chasing the move-lower can be challenging from multiple vantage points.
Notably, however, an RSI reading this oversold doesn’t necessarily mean that a bounce is imminent and the last instance of sub-25 RSI on the daily chart illustrates this well, as that posted back in Q3 of 2024, a couple weeks before the pair ultimately bottomed and then began to rally up to the 1.4750 test in early-2025. But – from that prior instance it was the RSI divergence that was perhaps most attractive to set up the reversal and that happened after a lower-low posted in price to go along with a higher-low via RSI.
USD/CAD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
Takeaways from the Above Data
So first and foremost not every chart is an instant setup, as some situations are perhaps best approached with patience and additional feedback. In this case, if looking to play reversals in USD/CAD, waiting for greater evidence of a bottom could make for a more attractive case. Something like RSI divergence can help with that, if we do ultimately see bears go for a test below 1.3500 but fail to continue the breakdown with a fresh trend.
And if looking to sell the pair, this is a tough time to do it given how oversold we are on the daily along with the support that’s already in-play at the 1.3500 level. So, waiting for a bounce up to a possible area of lower-high resistance can, at the least, allow for some risk management to be instituted on the basis of prior structure.
Given the stalling ahead of the 1.3500 figure last year there’s even three notable areas to look for that, as the higher-lows in June and July plot at 1.3540, 1.3557 and 1.3576. A pullback to and show of resistance there keeps the door open for another push down towards 1.3500, and perhaps in that instance we can see the breakdown test.
If looking to be more conservative than that, the prior support swing at 1.3643 is of interest, followed by the area around 1.3725.
USD/CAD Four-Hour Price Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Market Analyst, Global Macro
