Canadian Dollar Forecast: USD/CAD Breakout Hits Key Resistance

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD breaks yearly downtrend; presses first major resistance hurdle
• USD/CAD June advance may be vulnerable into monthly cross- Core PCE on tap Friday
• Resistance 1.3815/35 (key), ~1.3940, 1.3974-1.4018– Support 1.3733 (key), 1.3583, 1.3504/23

USD/CAD has broken through the yearly downtrend, with the advance now pressing a critical resistance zone near 1.3835. This marks the first major test of the June rally, and a pivotal inflection point for the broader recovery. The bulls may be vulnerable while below this level and the battle lines are drawn on the USD/CAD weekly technical chart.

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Canadian Dollar Price Chart – USD/CAD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Technical Outlook: In my last Canadian Dollar Technical Forecast we noted that USD/CAD, “responded to multi-month downtrend resistance last week with the August opening-range taking shape just below. From a trading standpoint, the immediate focus is on a breakout of the 1.3733-1.3835 range with the broader June advance vulnerable while below channel resistance. The weekly low should hold IF price is heading higher on this stretch.” The lows held that week with price surging nearly 1.5% off the August low. USD/CAD reversed sharply off the 2022 trendline and despite registering an intraweek high at 1.3924, price was unable to mark a weekly close above the 1.3835 technical barrier. The focus is on a reaction off this mark into the close of the month with a close above needed to keep the June advance viable in the weeks ahead.

Initial support remains with the yearly low-week close (LWC) at 1.3733- a break / close below this pivot zone would invalidate the monthly breakout and threaten a deeper setback towards the 2025 close low at 1.3583. Key support rests with the 1.618% extension of the February decline / 78.8% retracement of the late-2023 advance at 1.3504/23 and losses below this threshold would ultimately be needed to mark resumption of the yearly downtrend. Initial support objectives seen at the 2024 LWC at 1.3360 in the event of a break.

Initial weekly resistance is eyed along the 2022 TL (currently near ~1.3940) with key resistance steady at 1.3974-1.4018- a region defined by the 1.618% extension of the June advance, the 2022 high and the 38.2% retracement of the yearly range. A topside breach / close above this threshold is needed to fuel the next major leg of the advance towards the yearly high-week close (HWC) at 1.4292.

Bottom line: The USD/CAD rally is struggling at a major technical hurdle here and a close above this key pivot zone is needed to validate the breakout of the yearly downtrend. From a trading standpoint, losses would need to be limited to 1.3733 IF price is heading higher on this stretch with a weekly close above 1.3835 needed to fuel the next leg of the June advance.

Keep in mind we get the release of key U.S. inflation data this week with the Core Personal Consumption Expenditure (PCE) on tap Friday. Stay nimble into the monthly cross and watch the weekly close here for guidance. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex