Canadian Dollar Forecast: USD/CAD Surges 2% After Breakout – 1.38 Now the Battleground

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD has advanced more than 2% after breaking above multi-week resistance, confirming a shift in near-term structure..
• The rally is now approaching resistance near 1.38, with more significant resistance eyed just higher where multiple technical levels converge.
• A sustained move above this zone would signal a broader recovery phase, while rejection here keeps downside risk toward prior resistance, turned support.
• Resistance ~1.3812, 1.3889-1.3929 (key), 1.4047 – Support 1.3724/33, 1.3617 (key), 1.3494

USD/CAD has gained momentum after clearing a key resistance barrier, extending its multi-week rally. The move has carried price into a well-defined resistance area that has previously acted as a pivot within the broader structure. While the breakout signals improving near-term sentiment, the rally now faces a critical test. A sustained push higher would reinforce the recovery and open the door to further gains, while hesitation at this level could lead to consolidation or a pullback after the recent advance. Battle lines 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 last month’s Canadian Dollar Technical Forecast we noted that USD/CAD advance was rejected at pivotal resistance and that, “The focus is on a weekly close breakout of the 1.3617-1.3733 zone for guidance.” The range broke lower later that week with price registering an intraday low at 1.3525 before reversing sharply higher. The bulls spent three-weeks below key resistance before finally breaking higher this week with the advance now extending more than 2% off the monthly low.

Initial resistance is now in view at the 52-week moving average, currently near ~1.3812 and is backed by key confluence zone at 1.3889-1.3929- a region defined by the 61.8% retracement of the November decline, and the 2023 / 2026 swing high. Note that the upper parallel of the 2025 pitchfork converges on this threshold over the next few weeks and a break / close above this slope is needed to suggest a more significant trend reversal is underway. Subsequent resistance objectives are eyed at the November high-week close (HWC) at 1.4047 with the next major technical consideration eyed at the 50% retracement of the 2025 decline, the November high, and the February low at 1.4137/51.

Support now rests at the 1.3724/33 pivot zone- a region defined by the 38.2% retracement of the November decline, the objective yearly open, and the 2025 low-week close (LWC). Key support now rests with the yearly LWC at 1.3617. Note that the 2023 trendline converges on this level next month and loses below this slope would invalidate the multi-year uptrend and mark resumption of the 2025 downtrend. Subsequent support objectives rest with the 2024 august low close at 1.3494 and the 100% extension of the November decline at 1.3431.

 

Bottom line: USD/CAD broke above pivotal resistance this week with the advance now approaching initial resistance at the yearly moving average. From a trading standpoint, losses should be limited to 1.3724 IF price is heading higher on this stretch with a weekly close above 1.3812 needed to fuel the next leg of the advance. Look to reduce long exposure / raise protective stops on a rally towards 1.3889-1.3929- look for a larger reaction in price there for guidance IF reached.

The Economic docket is quiet for the remainder of the week with key retail sales, PMI figures, and Non-Farm Payrolls on tap next week. Keep in mind traders will remain focused on developments out of the Middle East with respect to the ongoing war in Iran. Keep an eye on the headlines over the next few days and watch the weekly closes 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, Senior Technical Strategist

Follow Michael on X @MBForex