Canadian Dollar Outlook: USD/CAD breaks to cycle highs, buying dips preferred

• Break above 1.4027 hold
• Momentum signals remain bullish
• Dip-buying preferred
• Powell, bank earnings insights, Trump feed in focus

USD/CAD Summary

Momentum and price signals favour USD/CAD upside following the break of 1.4027, with technicals supporting a buy-the-dip approach. With the macro calendar thinned by the U.S. shutdown, traders will be leaning on remarks from Jerome Powell, big bank earnings, and Trump’s Truth Social feed for clues on consumer trends and rate expectations.

USD/CAD Closes at Post Liberation Day Highs

USD/CAD finished Monday’s session at its highest level since April 10, the height of the initial tariff tensions in which Canada were in the thick of it. Having cleared the important 200-day moving average last Thursday and back-tested and bounced from the level in each of the past two trading sessions, the path of least resistance appears higher in the short term.

Monday’s bullish engulfing candle adds weight to that view, as does the close above 1.4027—the low struck on Liberation Day when Donald Trump first unveiled reciprocal tariff rates for trade partners. It also marks the 38.2% Fibonacci retracement of the February–June high-low. USD/CAD had been capped beneath it in the period since, so the break and close above may prove significant if it holds during Tuesday’s session.

Source: TradingView

 

 

Should USD/CAD hold above 1.4027, longs could be established above the level with a tight stop below for protection. Given the pair’s tendency to gravitate toward big figures, 1.4100 screens as a potential initial target, with the 50% retracement of the Feb–June move at 1.4168 the next after that. If the latter is reached, it would provide the option for longs to hold, cut, or reverse depending on price action at the time.

If USD/CAD fails to hold above 1.4027, the setup could be flipped. Shorts could be established beneath the level with a stop above recent highs to guard against a resumption of the established trend. The 200-day moving average and 1.3900 both screen as potential nearby targets.

Given the positive slope of the 50-day moving average and bullish signals from RSI (14) and MACD which reveal strengthening topside momentum, buying dips over selling rips remains the preferred strategy right now.

As for potential fundamental catalysts, the data calendar from both the U.S. and Canada lacks major market movers this week, in part due to the ongoing U.S. government shutdown which has delayed the release of many reports. That leaves big bank earnings in the United States, central bank speeches including Jerome Powell later Tuesday, and Donald Trump’s Truth Social feed as the key known risk events to watch.

While few can predict what Trump may post, it’s hard to see Fed officials offering much calendar guidance given they—like us—are flying blind when it comes to what’s going on in the U.S. economy. Insights from the big U.S. banks on customer behaviour may therefore be used as a proxy by traders to assess what implications it may have for the Fed rate outlook.