Canadian Dollar Forecast: The 1.4000 USD/CAD Test

USD/CAD Talking Points:

• USD/CAD rallied from lows below 1.3750 to highs at 1.4300 in a little over a month.
• Since that 1.4300 test, however, price has been in a decisive sell-off, allowing the 1.4000 psychological level to come back into play.
• With the Fed on Wednesday, USD/CAD can be one of the more attractive pairs for USD-strength scenarios, given that pullback and the play around the psychological level.

It’s been feast and famine for USD/CAD bulls as an aggressive topside trend met its maker at the 1.4300 handle earlier in October. Perhaps the most pronounced part of that backdrop was just how consistent the move was, both on the way up and on the way down. But at this point, we find the pair at a possible turning point given the 1.4000 level that has come back into play, holding support last Friday and leading to a bounce so far to start this week.

USD/CAD Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

USD/CAD Shorter-Term

The four-hour chart further illustrates this consistency of trend, both up and down, and it also shows where buyers have so far faced pressure when trying to evoke a larger bounce from the 1.4000 handle. At this point, that puts pressure on the 1.3969 level, and price would need to hold a higher-low for shorter-term bullish trend themes to gain traction.

Any higher-low above 1.3969 could suffice, although, ideally, I think that higher-low would include a test and hold of the 1.4000 level which would then open the door for a push up to 1.4056, and a breach of that price would constitute a short-term higher-high which would further illustrate bullish trend construction.

USD/CAD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

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