USD/CAD: Will Bulls Breach the Resistance Level?

The USD/CAD currency pair has recently shown resilience, bouncing back from a significant long-term uptrend line. This key support level, situated around the 1.3580 mark, has held firm since September 2022, bolstering the overall bullish sentiment for the pair.

Though, the immediate outlook is not entirely straightforward. The USD/CAD continues to face resistance from a medium-term bearish trendline, which is currently capping any substantial upward movement.

Technically, indicators suggest a potential shift in momentum. The MACD (Moving Average Convergence Divergence) is showing signs of strengthening, inching closer to a bullish crossover above the zero line. Concurrently, the RSI (Relative Strength Index) is climbing towards the 50 level, frequently enough interpreted as a sign of increasing upward momentum.

If the bullish trend persists, immediate resistance is anticipated at the convergence of the descending trendline and the 50-day simple moving average. This key area is located around the 1.3700 mark. A triumphant breach of this resistance could pave the way for further gains, targeting the 1.3800 to 1.3865 resistance zone.

Conversely, a notable downturn below the 1.3580 support level, coupled with a break below the nine-month low of 1.3540, would significantly challenge the established long-term bullish structure. In such a scenario, attention would shift to the 200-week SMA, currently positioned near 1.3420,as the next crucial support level.

While the long-term trend remains positive, traders should exercise caution due to the current medium-term technical constraints. A decisive move above 1.3700 would reinforce the bullish case, whereas a fall below 1.3540 could signal a potential shift toward a more bearish outlook for the USD/CAD.

How might a dovish shift in Bank of Canada (BoC) monetary policy influence the USD/CAD exchange rate?

Current Market Sentiment & Key Levels

The USD/CAD pair is currently navigating a critical juncture. After a period of consolidation, the pair is approaching a notable resistance level around 1.3750. The question on every trader’s mind is: can the bulls sustain momentum and break through, or will we see a reversal? Understanding the underlying factors driving this pair – including US dollar strength, Canadian dollar performance, and crude oil prices – is crucial for informed trading decisions.

Currently (July 28, 2025), USD/CAD is trading at 1.3715,showing a slight upward trend. This is largely fueled by positive US economic data released earlier this week, specifically the stronger-than-expected GDP growth figures.Conversely, Canadian inflation data came in slightly below expectations, putting downward pressure on the CAD.

Factors Supporting a Bullish Breakout

Several factors suggest a potential breach of the 1.3750 resistance:

US Economic Data: Continued positive economic indicators from the US, such as robust employment numbers and manufacturing activity, will likely bolster the US dollar. This directly translates too upward pressure on USD/CAD.

Federal Reserve Policy: The market anticipates the Federal Reserve maintaining its hawkish stance, potentially signaling further interest rate hikes. Higher US interest rates attract foreign investment, strengthening the USD.

Crude Oil Price Volatility: While Canada is a major oil exporter, significant volatility in crude oil prices can impact the CAD.A sustained decline in oil prices would weaken the Canadian dollar, favoring a USD/CAD rally.

Risk Sentiment: Increased global risk aversion typically drives investors towards safe-haven currencies like the US dollar.Any geopolitical instability or economic uncertainty could trigger a “flight to safety,” benefiting the USD/CAD pair.

Technical Analysis: Chart Patterns & Indicators

From a technical perspective, the USD/CAD chart exhibits several bullish signals:

Ascending Trendline: The pair has been consistently forming higher lows, establishing an ascending trendline that suggests underlying bullish momentum.

Moving Average Convergence Divergence (MACD): The MACD indicator is currently showing a bullish crossover, indicating increasing buying pressure.

Relative Strength Index (RSI): The RSI is approaching the overbought level (70), but hasn’t crossed it yet, suggesting there’s still room for upward movement.

Fibonacci Retracement Levels: Key Fibonacci retracement levels suggest potential support zones should the price pull back, offering opportunities for buying on dips. The 38.2% retracement level currently sits around 1.3680.

Potential Resistance & Support Levels

Identifying key support and resistance levels is vital for risk management and trade execution.

Resistance Levels:

1.3750 (Primary Resistance) – The immediate hurdle for the bulls.

1.3800 (Secondary Resistance) – A break above 1.3750 could open the door to this level.

1.3850 (Tertiary Resistance) – A more significant resistance level,representing a multi-month high.

Support Levels:

1.3680 (First Support) – The 38.2% Fibonacci retracement level.

1.3630 (Second Support) – Previous swing low.

1.3580 (Third Support) – The 50% Fibonacci retracement level.

Impact of Bank of Canada (BoC) Policy

The Bank of Canada’s monetary policy plays a crucial role in influencing the CAD. Any dovish signals from the BoC, such as hinting at potential interest rate cuts, would likely weaken the Canadian dollar and support a USD/CAD rally. Conversely, a more hawkish stance, indicating a willingness to tighten monetary policy, could strengthen the CAD and cap gains for the pair. Monitoring BoC statements and inflation expectations is therefore essential.

Real-World Example: 2023 Oil Price Shock

In late 2023, a sudden surge in geopolitical tensions led to a significant spike in crude oil prices. This initially boosted the CAD, as Canada benefited from higher export revenues. However, the subsequent economic slowdown triggered by the oil price shock ultimately weighed on the CAD, allowing the USD/CAD pair to rally. This illustrates the complex interplay between oil prices, economic growth, and currency movements.

Trading strategies & Risk Management

For traders looking to capitalize on a potential bullish breakout, consider the following strategies:

Breakout Trade: Enter a long position once the price decisively breaks above the 1.3750 resistance level.

Pullback Trade: Wait for a pullback to the 1.3680 support level before entering a long position.

* risk Management: Always use stop-loss orders to limit potential losses. A stop-loss order